Advice to reduce taxes selling RE to buy retirement mutual funds?

Question

I have properties that I'm selling to buy REIT mutual funds as I'm nearing retirement (don't want to deal with the hassles).  Any advice on how to not get killed in taxes as I make this transaction?  Less than $1 million total.

Caleb Heimsoth · Answer

@Gebson Pinheiro. Do you have any idea how much in taxes you’ll pay if you do nothing? I would start there as that amount would dictate what I do, meaning more taxes I would strategize and less I probably wouldn’t worry.

One thing you could do (if multiple properties), is sell over a period of years to spread the gains out.

Michelle Reid · Answer

Have you looked into 1031 into a qualified REIT?  There are specific REITs for this purchase.  They are sometimes "wrapped" with a qualified intermediary and sometimes you would find your own.  You can 1031 those properties into the REIT.  The problem is finding a REIT you like to exchange into.

Thomas Rutkowski · Answer

@Gebson Pinheiro

A 1031 exchange is not going to help you. That only works if you want to keep your assets invested in real estate. What might work for you is using what the IRS terms an intermediary installment sales transaction. When you couple this with a monetization loan, you can essentially defer the taxes on the capital gains for 30 years while still getting cash at closing that can be redeployed elsewhere. And even if you remain in real estate, this approach allows you to start over with a fresh depreciation schedule in the new property.

The present value of that increased depreciation may be greater than the advantage of perpetual tax deferral in a 1031. The result will differ for every deal, but it should be taking into consideration.

Gebson Pinheiro · Answer

bump

Advice to reduce taxes selling RE to buy retirement mutual funds?

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