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Structured Sale Tax Issues
2008-01-30 13:45:00 Recently investors have begun to explore the concept of a "structured sale" as a way to defer taxes without the constraints of finding a replacement property. This article looks to see what structured sale tax issues may need to be considered with this new twist on owner financing and installment sales of real estate.Many real estate investors have tried a 1031 exchange as a real estate
Is the Structured Sale legal?? - Yes, and here?s why?
2007-03-16 23:57:00 We have spoken to several sellers and professionals advisors lately who have mistakenly lumped the Structured Sale into the category that the Private Annuity Trust now falls into… … NO LONGER VALID BY THE IRS AS A CAPITAL GAINS TAX DEFERRAL TOOL…. Well, before this completely wrong assertion causes sellers and professional advisors to look away from ...
So, what is this ?3rd party assignment company? for a structured sale?
2007-03-10 02:31:02 So, just what is the 3rd party assignment company and why do we need them? The 3rd party assignment company (from here on 3rd party) for a structured sale (Ensured Installment Sale) is really what makes the whole thing tick. Basically, the 3rd party is what turns a traditional installment sale into a structured sale. Here’s a simplified process flow showing where the 3rd party fits in. Buyer sends funds to escrow Escrow distributes funds designated to structured sale to the 3rd party 3rd party purchases annuity from Allstate (or Prudential) Allstate (or Prudential) sends guaranteed payments to seller The key to the 3rd party is that it is based “offshore” in Barbados. Now… don’t let this scare you. I know the term “offshore” has been used to describe some less than honest circumstances; however, the “offshore” 3rd party is backed by a Fortune 100 life insurance company such as Allstate or Prudential. Allstate’s 3rd...
When is it too late to use an Ensured Installment Sale (structured sale)?
2007-02-21 14:17:01 I’ve been speaking to many property sellers recently; however, a conversation with one in particular made me want to write this post. The seller I was speaking to is in his 70’s and is selling his fractional ownership in several multi-unit properties that he has held for 20 years. He actually already has a buyer lined up, which has signed a purchase and sale agreement. So… is it too late to use the EIS? The answer is NO! As long as the sale has not yet happened and money has not changed hands the EIS can still be used. This particular seller wants to use the EIS to help fund his retirement and pay for his wifes medical bills. He doesn’t want to mess around with finding a good investment broker who can invest his money for him… he simply wants a safe and secure stream of income that will be around for as long as he will. So, I’ll be meeting with this seller next week and helping him restructure the P&S agreement to fit in the EIS and g...
Clearing up a bit of confusion with the Structured Sale
2007-01-29 02:03:02 I recently came across a company who offers capital gains tax deferral strategies to sellers of appreciated assets. This particular company used to offer the now defunct Private Annuity Trust and is offering something else instead. (You will find their google ads and websites all over the net… you have probably seen them before but I choose not to mention names because that is not my style) Anyhow, I signed up for their “Free Report” and have been receiving their “educational” email over the past week or two. In the latest email she describes the Structured Sale, but I noticed that there are a few pretty big errors that need clearing up so you know the truth about the Structured Sale. The first error she states: “…the only Assignment Companies offering structured sales are owned by large insurance companies.” I know, this is splitting hairs, but the statement is wrong. The Assignment Companies are not “owned” by any in...
Part 2: The Decision Process - Is the Structured Sale Right For You?
2007-01-29 02:03:02 Here’s part 2. So, you have decided that you are selling your business or real estate. It is now time to decide which sales and tax deferral method you should use to maximize your benefits and minimize your capital gains taxes. Let’s go over some of the more popular sales methods out there. All cash sale - This is pretty self explanatory. You sell for all cash to a buyer who either has financing or cash to bring to the deal. You will be hit with capital gains tax in the year of the sale; however, you will have all of your money right now (minus your 15% capital gains of course). Costs the seller no extra cash to use. 1031 Exchange - This method is very popular and an excellent tax deferral and wealth building tool. Here are the cliff notes if you don’t know how a 1031 works. You sell your investment property and place the proceeds in an escrow account until you find a “like-kind” investment property to roll the cash into. However, there are s...
The decision process: Choosing your sales method - Is the Structured Sale r
2007-01-29 02:03:02 Just like any big decision in your life, choosing how you sell your business or real estate should be a well thought out process. Afterall, most of your retirement may be wrapped up in your business or investment property. So, how do you decide which sales method is the best choice for you? First off, you need to determine what your goals are with the sale of your appreciated asset. Are you selling so you have cash to place in a new investment? Are you selling because you want to retire and will use the sales proceeds to help fund retirement? Are you selling so you can “trade up” and roll your equity into another investment property? Are you selling to pay off a debt? Are you selling because you inherited a business/property and have no desire to run it yourself? Are you selling because you don’t want the hassle of managing a rental property or business but want to continue having monthly cashflow? Etc……. you get the point.. You need to really dec...
2007?the year of the Structured Sale?
2007-01-29 02:03:02 Will 2007 be the year of the Structured Sale? It’s hard to tell, but I do think that it will become an increasingly popular capital gains tax deferral tool. 2007 may be the year that the Structured Sale breaks out of the “its too new” syndrome and into the more mainstream consciousness of financial and real estate professionals nationwide. Just in the last 2 months the internet craze (well…I guess I wouldn’t quite call it a craze) for the term “Structured Sale” has taken hold. As late as October of 2006 you could type in “Structured Sale” or “Structured Sales” and get a bunch of results that had nothing to do with capital gains at all. Now… the first few pages are filled with the structured annuity heavy hitters websites. More and more people are searching specifically for the term “Structured Sale”, which tells me that word is getting out and people are realizing how great of a sales method it...
This is part 2 in the series on Structured sales. Once agai
2007-01-17 00:41:01 This is part 2 in the series on Structured sales. Once again, this series was written by Trevor Mauch, as a guest piece on the blog. We hope you have found it to be interesting and useful. Note: We cannot speak for against this type of strategy, and we advise anyone to do their homework before conducting any type of real estate strategy. BiggerPockets does not necessarily advocate or agree with the beliefs, expressions or opinions of our writers. The Advantages & Disadvantages of a Structured Sale Some of the benefits and advantages: Large Fortune 100 life insurance company guarantees your payments rather than relying on your buyer Avoid depending on buyers ability to manage the property or business (even if the buyer runs the business or property into the ground the seller is protected and is guaranteed to receive each and every payment on time.) Defer capital gains to the year you receive payments - reducing your tax liability Provides guaranteed rate of return on the ...
We’re going to do a 2 part series on Structured sales
2007-01-13 06:38:01 We’re going to do a 2 part series on Structured sales, here on the BiggerPockets Blog. This is a subject that many people don’t know about and I thought was worth exploring. The series was written by Trevor Mauch, as a guest piece on the blog. Note: We cannot speak for against this type of strategy, and we advise anyone to do their homework before conducting any type of real estate strategy. BiggerPockets does not necessarily advocate or agree with the beliefs, expressions or opinions of our writers. What is an Ensured Installment Sale? (aka Structured Sale) - PART 1 An Ensured Installment Sale (Structured Sale) is a new twist on the traditional installment sale that enables both the seller and buyer of appreciated assets to take advantage of tax, safety, and/or financial benefits that traditional sales methods don’t offer. This method was developed by Allstate Insurance company in 2005 and is becoming a sought after method for tax deferral when selling a bu...
Part 2 of 3 - Origin of Insured Structured Sale
2006-12-02 15:27:08 Part 1 covered the basics of an Installment Sale. Part 2 will explain the concept of a Structured Sale. Part 3 will then explain how both the Installment Sale and Structured Sale have led the way for the Insured Structured Sale.Let's say we are selling a piece of real estate for this example. A buyer is located and a sales price negotiated. Instead of the buyer making payments to the seller over time, the buyer can assign his obligation to make those payments to an Assignment Company.The buyer effectively gives the sale proceeds in a lump sum to the Assignment Company, who in turn agrees to make payments back to the seller over a certain period of time and at a specific interest rate. Thus, the risk is transferred to the Assignment Company and away from the seller.The seller only has to pay capital gains tax on the amounts he receives as principle as he receives it in the payments from the Assignment Company. He has no access to the bulk of the money, so no constructive receipt has...
Part 1 of 3 - Origin of Insured Structured Sale
2006-12-02 15:27:08 I thought it best to break down how the Insured Structured Sale has come into being into a 3 part article. I think it will give you a bit of insight on just how powerful a concept it actually is, and that it is a great alternative to the Private Annuity Trust, which is currently unavailable for use, as of 10/18/2006 until further notice.In this article, I'll give the basics of an Installment sale which follows IRS guidelines, section 453. It is not my intent to go into IRS code specifics here or technical jargon, only to relay the concepts to make them understandable.Part 2 will feature the basics of the Structured Sale, and Part 3 will show how both Parts 1 and 2 have emerged into the Insured Structured Sale.In its basic structure, and I'll use real estate as an example, the Installment Sale is basically an agreement between the buyer and the seller for the buyer to make payments back to the seller over a stated period of time, with a specific interest rate until the agreed upon ...
Part 3 of 3 - Origin of the Insured Structured Sale
2006-12-01 10:05:05 Part 1 covered the basics of an Installment Sale. Part 2 explained the concept of a Structured Sale. Part 3 will now go over how the combination of the first two concepts has become the Insured Structured Sale as it exists today. Using the example of a 500K sale of real property, here?s how the Insured Structured Sale might work. Assume this property is owned free and clear. A buyer is found and an agreeable sales price is determined (500k). Prior to close of escrow, an Assignment Company meets with the buyer, and the buyer assigns the obligation for making payments totaling the sales price to the seller. The buyer pays his 500K to the Assignment Company and his sale is complete. The Assignment Company now enters into a contract with the seller to make payments to the seller over a certain amount of years at an agreed upon interest rate. Capital Gains Tax and recaptured depreciation is deferred, and paid back in small chunks as payments are received. It is at this point the Insured...
Insured Structured Sale as PAT Alternative
2006-10-25 09:18:03 I want to invite you to a special teleconference this Thursday, October 26th to learn about an exciting new alternative to the Private Annuity Trust. As I stated in my last post, the PAT was discontinued until further notice by the IRS on October 18, 2006. The Insured Structured Sale is a very effective capital gains tax saving strategy. I will be discussing the features and comparing it to the Private Annuity Trust. It is cutting edge information that you must learn about if you or anyone you know has a capital gains tax issue. Please go to this link and register now. Sign me up for the call. I look forward to cluing you in to your new alternative. Paula Straub SaveGainsTax 760-917-0858
Structured Sale of Real Estate
2006-09-18 12:01:00 Combining the techniques of structured settlements and installment sales results in a bourgeoning real estate technique called a structured sale. In a structured sale of real estate, it is important to be knowledgeable about the way these two techniques work individually and then how they work together. The structured sale of real estate concept is exciting ... |
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