Many savvy real estate investors in the state of California are turning away from 1031 transactions in order to defer capital gains taxes. This is due to the fact that they are burdensome, stressful, and fail on a regular basis because either suitable reinvestment property cannot be timely identified or they don’t want to buy the property Identified. If your 1031 transaction is failing all is not lost. There is an alternate solution that can be utilized as replacement alternative to a 1031 exchanges, and also to save a failing 1031 transactions. The Internal Revenue Code Section 453 “Installment Sale method legally delays capital gains taxation from the sales of appreciated assets, such as Investment real estate. In essence, it is a perfectly legal transaction sale structure found in Section 453 of the Internal Revenue Code (IRC).
Although the installment sale process is far more effective than the 1031 capital gains deferment method, it is not as well known. The following information will explain the installment sale strategy further, and how it benefits real estate investors/Sellers that are selling a property or properties for profit. An installment sale is a tax deferment arrangement in which the real estate investor/Seller sells his or her property and agrees to take at least on payment in the tax year following the sale date. The real estate investor/seller of the property does not receive the proceeds in a lump sum payment. Installment sales are also a great tax deferral tool for the sale of other appreciated assets.
Instead, he or she receives payments over an extended period of time. In an installment sale, the buyer receives the property at the beginning of the installment period, but makes payments over the installment period, usually several years. The revenue, expenses, and taxes, including the capital gains tax, are recognized at the time of the collection of the payments by the Seller as opposed to the time of the sale. In addition, a minimum of one installment payment must be received after the close of the taxable year in which the sale occurs. The installment sale method of taxation deferment provides an exception to the basic principals of income recognition.
It accomplishes this by allowing the real estate investor/tax payer to defer the inclusion of income that is based on the amounts that are to be received in distribution payments. The installment sale process legally requires and obligates the buyer(s), under an enforceable contract with the Seller, that the buyer of the investment property must make regularly scheduled payments as determined by the seller. Typically speaking, the disbursement of funds occurs on an monthly or annual basis for a specified period of time such as ten (10) years.
In conclusion, the good news is that failing 1031 transactions can easily be skillfully saved by selling Sellers’ 1031 Account balance to a specialized Installment Sale Buyer, such as Tax Deferred Sales, LLC (“TDS”). In addition, real estate investors, as Sellers do not need to take part in a 1031 transaction in order to defer capital gains tax when selling real estate at profit, as an alternative they can sell directly to TDS. There is a solution that is far more cost effective and a whole lot less stringent. Please contact Tax Deferred Sales today. TDS has specifically developed a proprietary tax expertise Installment Sale transaction structure that is far more effective than a complicated 1031 transaction. 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.