The current economic shut down has made it difficult to comply with IRS Section 1031 regulations for real estate investors in California, Massachusetts, New Jersey, and New York. Failing 1031 exchanges are at crisis levels across the United States for commercial property owners. Deals in progress on the sale of investment real estates assets are at risk of failing with no options for re-investment. It has become almost impossible to scout properties for reinvestment and to perform due diligence.
Taxpayers in existing 1031 exchange transactions are finding themselves in limbo facing large 30% tax rates on their real estate profits unless they can find a 1031 solution. The good news, is that similar taxpayers have successfully delayed taxation in this type of failing 1031 exchange scenario by implementing Installment Sales of their 1031 account balance.
If a replacement property is unlikely to be timely identified (within forty-five (45) days of the sale of the original property), you face a failing 1031 transaction. Also, you can face a failing 1031 Transaction if you have timely identified investment property but decide not to close on it within 180 days of that sale of the original property, it is considered a failing 1031 transaction. At this point one of two events can occur. The real estate investors can implement a 1031 alternative rescue Installment Sale as opposed to identifying reinvestment property and/or closing on what they identified, or they can receive the funds. If the investor receives the funds than he or she is liable for the capital gains taxes and other taxes equal to approximately 30% tax rate.
California taxpayers facing a failing 1031 exchange situation are highly Tax Deferral Motivated due to high state income taxation and continue to prefer a solution to defer taxation. In essence, you may carefully implement an Installment Sale in a failing 1031 exchange situation you can save your tax deferral.
Under this failing 1031 rescue solution, you implement an Installment Sale of the 1031 account balance to defer the capital gains tax without having to identify or purchase another piece of real estate. One such 1031 solution is called the Installment Sale method. It is based on the principal that you, not the Internal Revenue Service should control when you pay the capital gains tax when selling an investment property for profit.
Under an Installment Sale plan, the full amount of your proceeds is invested in a flexible manner in order to both meet your financial goals, and to preserve capital for specific financial needs now and in the future. The bottom line is that this tax deferment method provides you with the ability to pay your taxes in the future based on a schedule that actually works best for you. It legally allows you to delay taxes from the sale of a real estate investment by spreading the proceed payout over a number of years. Delaying taxes is always better than paying taxes.
If you need help setting up an Installed Sales plan in California, please contact Tax Deferred Sales today. TDS has specifically developed a proprietary tax expertise Installment Sale structure that does not involve the purchase of a replacement property or properties when selling real estate for profit. Our team of experts specializes in providing customized strategies that delay tax impact. TDS takes great pride in assisting sellers of appreciated assets in deferring the capital gains tax that greatly enhances the ability to grow your net worth. Our company was founded by a LLM tax attorney with over 20 years tax deferral experience and expertise with a singular focus on assuring sellers delay of taxation.