Thinking Outside the Bowl Tax Deferral Strategies

I don’t know about you but every time I get a tax bill, I get mad. Its not that I mind paying my fair share of taxes because I don’t but rather because I know that my tax bill will be more than last year and my taxes will be wasted. I want my taxes to go to helping minority kids get educated, fixing infrastructure and providing benefits for military families while their loved ones are deployed all over the world protecting our way of life. Instead, my hard earned income and yours is going to help some member of Congress provide another pork project for his district in an attempt to get reelected.

So that begs the question, “When buying or selling real estate, why wouldn’t you want to defer as much in taxes as is possible?” Clift Land Brokers agrees and have asked me to discuss some of Creative Real Estate Strategies thinking outside of the bowl tax deferral strategies that will help accomplish those goals.

Quite often when thinking about deferring taxes, a 1031 exchange almost always comes to mind. Although a 1031 provides a great opportunity to defer taxes, there are a number of potential pitfalls which can prevent the 1031 from being completed and any of these pitfalls can result in an immediate taxable event to the seller. For example, what if the seller is unable to identify one or more replacement properties within the 45 day identification period, a great replacement property is identified but there will be sales proceeds left over which will become immediately taxable or a great replacement property is identified but after the 45 day period expires, the seller starts making more demands on the buyer making a sale more difficult to complete. Creative Real Estate Strategies have tax deferral strategies that will prevent any portion of a 1031 from becoming immediately taxable and can prevent a seller from trying to use leverage after the 45 day period ends in order to get a better deal for themselves.

Before continuing, I believe that its important to mention that Congress is currently considering either modifying or eliminating 1031 exchanges. In my opinion, there is more reason for concern than in the past because now the republicans are beginning to think along those same lines so this bears close scrutiny. Having said that, there will still be an option to defer taxes when selling a property and that will be mentioned next.

Many times a seller would like to sell their property and retire but would still like to defer taxes. In this case a traditional 1031 won’t work but there are other tax strategies that can be designed that can defer capital gains taxes, state taxes where applicable and some if not all depreciation recapture for as long as the seller would like. Thus, the sellers have the ability to retire with a greater retirement income and are now free to move closer to their grand kids and spoil them to heights previously unknown to mankind as payback to their kids for being so miserable when they were growing up. If the individual decides to buy more real estate in the future, this strategy will work well because the cash flow can be used to pay the debt service on the new property while the proceeds from the previous sale are still taxed deferred for as long as the seller would like.

Clift Land Brokers is known nationwide for their ability and due diligence in finding great income producing properties for their clients. Obviously a key component to buying/selling income properties is the rate of return. To that end, Creative Real Estate Strategies utilizes a well known but little used strategy in rural markets that will assist Clift Land Broker’s clients in helping them increase the rate of return on an investment property and making the property more appealing to both buyers and sellers.

Again, these strategies are just another reason to trust Clift Land Brokers when looking to buy that once in a lifetime property or when ready to retire and wanting to maximize retirement benefits from the sales proceeds.