Capital gains by selling an investment property

[Pandu Chimata]

I am working with few owners who have owned their multi-units for the last 30 years. They want to retire now by disposing off their properties. One of their concern is capital gain tax that they incur due to the sale. What are some tax saving strategies ?

Any thoughts ?

[Dave Foster]

@Pandu Chimata, Several good options here by folks.  Seller financing is a very viable option but it will not defer the tax only delay and spread it out and the recapture of all depreciation in the year of the sale can be a major sting if that property has been owned for a long time.

The track that most of our clients will take at the retirement stage is to continue to defer the tax on gain with one final 1031 into a completely passive 1031 compliant investment. This could be a DST or TIC or NNN property. All of these work with 1031 exchanges so the clients can continue to defer all tax. They each have their advantages and disadvantages so it would be good to get to know all three. But they all have a longer window (especially the TIC and NNN which can commonly be found with 20 year lease terms).

this means that the client becomes ,wait for it,  a true Lazyboy landlord.  Their investment is absolutely passive and as @Basit Siddiqi said when they pass their heirs get the step up in basis so the gain disappears and they can start over with inherited property and no tax liability.  What a great gift to pass to your heirs.