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 Report on Saving Thousands Through Taxes
SPECIAL REPORT:
SAVE TENS OF THOUSANDS OF DOLLARS
ON YOUR APARTMENT BUILDING SALE
Why sell an apartment building and pay a large tax bill?
You would be left with much less capital earning low interest income. The assumption is that many sellers do not want continued landlord responsibilities with the IRS Section 1031 property exchange option.
I will give the following example of a building sale handled a common but costly way (all cash less huge taxes and commission costs) as compared to an installment sale. In an installment sale, the owner can take back most or all of the sale price in the form of a note. This creates monthly cash flow for the seller at a higher rate of interest than a bond. The greatest benefit is that the IRS does NOT take an upfront huge tax on the installment part of the sale. This leaves a larger amount of capital for you to earn interest. The only tax that is paid is on the cash received at the sale closing (plus depreciation recapture) in addition to the interest and principal paid during a given tax year. You only pay tax on the money as received, which is excellent for sellers who require a large monthly income. The following is an estimate comparison of selling an apartment building for all cash versus an installment sale based on a high income seller who is subject to the IRS Alternative Minimum Tax:
( Printer-friendly version - Click here )
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ALL CASH THROUGH REALTOR |
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INSTALLMENT SALE TO EMERALD
INVESTMENT ENTERPRISES |
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Sales Proceeds |
$500,000 |
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$500,000 |
| Commissions (5% of Sales
Price) |
25,000 |
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0 |
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Net Sales Price |
475,000 |
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500,000 |
| Purchase Price |
250,000 |
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250,000 |
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| ($50,000 down payment +
$200,000 Note to Bank @ 6%) |
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Net Gain (After Commission) |
225,000 |
|
250,000 |
| Depreciation Recapture |
22,000 |
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22,000 |
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Taxable Gain 1st yr. (After
Commission and Depreciation Recapture after escrow) |
247,000 |
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22,000 |
| Tax on Sale (Considering
Long Term Capital Gains, AMT Tax) |
85,709 |
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7,634 |
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| Cash
available for investment: |
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Net
Gain (After Commission) |
225,000 |
|
250,000 |
| Tax
on Sale (Considering Long Term Capital Gains, AMT Tax, and Depreciation
Recapture) |
(85,709) |
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(7,634) |
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Original Investment |
50,000 |
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50,000 |
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Capital Available for Investment |
189,291 |
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292,366 |
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Monthly Income Payments From 4.5% Bond (Before Tax, Amortized Over 30 Years) |
710 |
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**Monthly Income from $300,000 %6 Note Payment, Before Taxes |
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1,753 |
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Tax
on Monthly Income |
314 |
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748 |
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| Net
Monthly Income |
$395 |
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$1,005 |
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TOTAL SAVINGS Additional money saved in investment capital and payments over 15 years
$103,075 principal and $109,800 monthly net cash flow ($1005-$395 x 180
months) |
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$212,875 |
| ** Based upon a 10 Unit apartment building, held for 3 years. A $500,000 Note is Carried Back by the Seller @ 6%, amortized over 30 years, due in 15 years, less $200,000 balance due on note to bank, nets $300,000 worth of capital for investment @ 6%. |
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As you can see, working with Emerald Investment Enterprises to sell your property can save you significant amounts of investment capital. Please call me so we can discuss the specifics in further detail.
Dave Friedman
(818) 970-7701
Download a printer-friendly version of this report: EmeraldReport.pdf
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This example is intended to be used for discussion purposes only. Please consult your tax advisor.
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