Disposing of Appreciated Real Estate
by Sidney J. Ruth, CPA, CFP®

For many real estate owners, there comes a time when thoughts of finding tenants, paying the taxes, or dealing with late night telephone calls, become less appealing. Not to mention that at some point, most owners are anxious to maximize their real estate’s cash flow to fund retirement. Many owners of business-use real estate would like nothing better than to sell their property and ride off into the sunset, profits in hand.

Unfortunately, when selling highly appreciated real estate, Uncle Sam is all too eager to share in a portion of that profit. As a result, a real estate owner could benefit greatly from diligent planning aimed at maximizing profits and potential future income, and minimizing taxes from the sale of their real estate assets.

Consider More than Taxes
Not only should potential taxes on a sale be calculated and understood, but other options should be evaluated to see if and how they could fit into the planned sale.

Some of these options include:

• The possibility of using gifting strategies to bypass capital gains taxes and fulfill future income needs.
• Evaluating the benefits of a “1031 Exchange,” in which real estate can be exchanged tax-free, thus deferring built-in capital gains taxes. The options for replacement property are becoming increasingly diverse. If interested in learning more about this option, please contact our office at 267-384-5300 for more detailed information, and an in-depth analysis.
• For some, selling the property and paying the capital gains taxes may be the most advantageous and efficient option.

When contemplating the sale of real estate, there are numerous factors that will determine the most efficient method of disposal. Always be aware of those factors and how they may affect your unique circumstances.

Investment advisor representative of Investment Advisors, a registered investment advisor and a division of ProEquities, Inc. Securities offered through ProEquities, Inc., a registered broker-dealer. Member FINRA and SIPC. FIFS is independent from ProEquities, Inc.

FIFS Connection, Summer 2008, Vol.5, No. 2

FIFS Capital Advisor Group