1031 tax deferred exchanges are a popular way to defer capital gains taxes, which is why so many real estate investors in the state of California rely on them. Historically speaking, a plethora of them fail. This is due to the fact that the Internal Revenue Service (IRS) has made it incredibly difficult to abide by the strict rules and regulations as set forth in the Federal Tax Code. That statement is valid under normal circumstances. However, we are not currently experiencing normal circumstances. Just the opposite holds true.
The economic shutdown is putting more 1031 transactions in limbo than ever before. If you are experiencing a failing 1031 exchange, now is not the time to hit the panic button. The best advice is to remain calm and find an alternative tax deferment solution. You certainly do not need to cash out the investment and pay the entire capital gains tax that goes along with that. The Tax Deferred Sales, LLC proprietary Installment Sale strategy is the solution that you need. Savvy real estate investors have been utilizing this resourceful method to build wealth, as opposed to paying millions of dollars in taxes that are associated with selling investment property.
The Installment Sale method of deferring taxes is not nearly as well know as 1031 exchanges, however it is far superior in many ways. First and foremost, you do not need to identify or purchase a replacement property when selling your investment real estate. That means you do not need to worry about identifying a replacement property of similar value within 45 days of closing on your sale. That was hard to accomplish prior to the economic shutdown. It is all but impossible now. In addition, you do not need to purchase that property within 180 days of closing on your sale.
Things are moving extraordinarily slow right now to say the least. Six (6) months is not a long enough time to line up everything that needs to be accomplished when purchasing a replacement investment property. With a Tax Deferred Sales, LLC tax expertise Installment Sale structure, you sell your investment property to an TDS who then resells the property to a buyer, which has already been identified and lined up by Seller.
Instead of receiving the profit from the sale in one lump sum, TDS receives the lump sum and is legally obligated to pay you back your profits over a pre-determined number of years in the form of monthly or yearly payment.You choose the best repayment schedule structure to best suit your cash flow needs and tax deferral objectives.
You only pay taxes on the payments as you receive them and don’t pay on future payouts until you receive them in the future this is the legal tax mechanism under section 453 of the Internal Revenue Code, which is more beneficial than immediately paying taxes on a lump sum payout of profits which is immediately fully taxable on the filing date of your return. Often the payment of taxes over time as one receives Installment Payments will reduce the over all negative tax impact of an appreciated asset sale such as investment real estate. Similarly, a reduction of overall taxes and a tax payment structure due in the future will increase one’s net worth because of time value of money principals.
The bottom line is that with a Tax Deferred Sales, LLC Installment Sale transaction the taxes owed on the remaining payouts are deferred until you actually receive them. With TDS’ Installment Sale, you are not only saving a failing 1031 transaction, you are also freeing up money that can be spent any way that you choose.
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. TDS may also be able to assist other sellers of highly appreciated assets or provide you with a 1031 Alternative structuring. 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.