The most important aspects of a real estate investment is realizing the maximize amount of money from that investment. That means you need to purchase the property at a favorable price, sell it for a profit, and put the highest percentage of that profit back in your pocket. The buying low and selling high principal has been utilized since trade first began on this earth. However, the key to a truly successful real estate investment is based on how much of the profit you can actually keep, verses how much of the profit is paid out in taxes.
That is why so many real estate investors in California rely on 1031 tax deferred exchanges. The basic principal behind it is that the profit from the sale of a real estate investment is re-invested into another property of similar value. The method does defer the capital gains tax since the investor has not technically realized the gain in the form of a liquid asset. However, failing 1031 transactions are common due to the nature of how the transaction must be constructed. For example, the seller must identify a replacement property within a short 45-day window from the time they close on their sale.
The seller must also close on the replacement property within 180 days after they close on the sale of the original investment property. These are difficult regulations to follow to say the least.
This statement holds especially true during the economic shutdown that has made it next to impossible to conduct large real estate transactions. Well-informed real estate investors are turning to Tax Deferred Sales, LLC proprietary Installment Sale transactions in order to save failing 1031 transactions. It is actually a little known gem that utilizes a basic, yet long standing principal of taxation.
Receiving profit in installment payments as opposed to receiving the profit in one large amount is the key to deferring taxes such as capital gains taxes. The Tax Deferred Sales, LLC Installment Sales process works in the following manner.Tax Deferred Sales, LLC as a highly specialized Installment Sale Purchaser buys your 1031 Exchange Account Balance. Tax Deferred Sales, LLC as such a Buyer, is legally obligated to repay to you as Seller the value of the purchased account balance plus a yield on the same.
Tax Deferred Sales, LLC repay the seller for the property in installment-based payment distributions, which can be made, monthly, bi-monthly, annually, or even continued to be deferred for further accumulation and distribution at a later date. The seller determines how many years the installments will take place. Taxes are only due per each installment for the tax year that the installment is paid, which is the legal mechanism under section 453 of the Internal Revenue Code providing for tax deferral under the Installment Sale rules. Taxation on the remaining balance yet to be paid out is deferred until such future payouts are actually made. The Tax Deferred Sales, LLC Installment Sale strategy not only saves failing 1031 exchanges, it also frees up liquid assets that can be used to reinvest in other opportunities that would not be qualified under more stringent 1031 “Like Kind” rules.
If you need help saving a failing 1031 transaction in California, please contact Tax Deferred Sales today. TDS has specifically developed a proprietary tax expertise Installment Sale structure to save failing 1031 exchange transactions. 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.