Using Deferment to Significantly Reduce the Tax Burden of Asset Sales
Cheril Lyn Muniz
Forging connections between Business Owners & game-changing financial strategies ?? | Sr. Capital Consultant | Leading in transformative solutions for business success ???? | Empowering entrepreneurs ??|Published Author
Challenge
?Selling your real estate, business or other capital asset can come with some hidden tax
surprises. Owners are often shocked to learn that their tax obligation may be even higher
than the current 20% federal capital gains tax rate, state rate and the additional 3.8% Net
Investment Income Tax brought on by the Affordable Care Act.
?Not understanding the tax codes and how to properly apply them, owners often times
pay unnecessary taxes when they sell their assets and see a significantly greater portion of
their profits eaten away.
?Solution
?By coupling a monetization loan with an installment sale, sellers can lawfully defer capital
gains taxes for decades and receive at escrow closing a tax-free lump sum of money that
is nearly equivalent to the amount of the sale proceeds.
This planning approach is applicable to the sale of most any highly appreciated asset,
including:
?Real estate - Commercial, Investment Property, Land - Even Principal Residences
? C/S-Corps - including professional practices (Medical, Dental, Chiropractors, etc.)
? Partnerships, Partner Buyouts, & LLC’s
?? Privately held stock
? Collectables - Art collections, car collections and antique collections
? Contract and mineral rights
? And many more…?
Results
?? $1.1m Dental practice increased proceeds by 46%
?? $10m apartment complex sales increased proceeds by 34%
?? $2.9m personal residence increased proceeds by 20%
?? $26.9m farm property increased proceeds by 45%
?Key Benefits
?? Seller receives a non-taxable lump sum nearly equivalent to the sale
proceeds that can be invested and controlled by the Seller.
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?? Capital gains taxes are deferred for decades, enabling the taxes to be paid
with inflation adjusted dollars
? Provides an exit strategy and does not require the purchase of “like-kind”
replacement property like in a 1031 Exchange
?? No requirement to donate the asset to a charity.
?? Allows for capital asset sales to related parties
?Qualifications
?? Most capital assets with a selling price of $500,000 or more with no maximum
? Sellers of appreciated assets who desire a true exit strategy
? Sellers who do not want to give their asset to charity or are limited by annuity
Payments
?? Any seller facing a substantial capital gains tax obligation at closing,
cancellation of debt, depreciation recapture, expected failure of a 1031
exchange, pre-payment of an installment debt
IRS Codified
?? Installment Reporting has been in law since 1913
? The IRS codified into law in 1980 the ability to monetize installment sale
contracts without losing tax deferral
? Office of the Chief Counsel of the IRS in 2012 issued a memorandum that
supports the foundation of this planning approach
About Project Blue
?Bringing the best practices of Fortune 500 Companies to the small business owner, Project Blue was founded on the premise that EVERY business owner should take advantage of every incentive program that they are legally entitled to claim. Project Blue is a resource for nearly 1,100 Rebates and Incentive Programs, cost recovery, as well as financing opportunities.
Contact Cheri Muniz at (925) 381-4754 | [email protected]