Seller Financing and Tax Issues

[Chris Rightmyer]

Hello.  I have an individual that is opened to selling me their current duplex portfolio, consisting of around 7-10 duplexes.  I was attempting to work with him on some sort of seller financing option as he would be open to it.  The problem that we are running into is that he would get hit really hard with the capital gains tax once sold and is wanting to hold onto until he passes so that his wife will benefit from the step up basis at his time of death.

Does anyone have any ideas or solutions that I could possibly present or offer that would work best for something like this prior to the owner passing that would benefit him tax wise or at least bring it down quite a bit while obtaining the portfolio?

Thanks in advance.

[Joe Splitrock]

@Chris Rightmyer the best tax situation is selling after he dies at stepped up basis. That assumes he is the sole owner and that he dies before his wife.

One argument to sell now is to reduce stress in old age. Since he cares about his wife, the advantage of selling now is he doesn't leave his wife to deal with managing or selling the properties. Death of a spouse is very stressful, so why leave her to deal with rental properties?

Seller financing will allow him to spread his tax burden over a number of years, so although he pays taxes, it is not all at once. 

Play off his emotions and I don't mean this disrespectfully. He worked hard to build a rental empire and he earned the right for stress free living. Seller financing is truly mailbox money. He just cashes the check every month. No late night calls, no insurance, taxes, tenant placement or any of the drama. Instead of worrying about a few bucks after he passes, spend the time with his wife while he is alive. Set her up to have no worries after he dies.

Reassure him that you are young investor, hoping to enjoy his success in old age. People sell for other reasons besides money. If he can bond with you, it will make letting go easier. I suspect this isn't about the money, it is him having trouble letting go. Be patient and low pressure.