Buying from seller and dealing with capital gains tax road block

[Hassien Serrano]

Hello,

Here is my awesome dilemma.

Seller received advice and changed mind to sell because of concerns on capital gains tax on a property in NY if they sell it to me and carry the 1st/the note/owner financed and no money down! Understandably they don't want to pay the potential heavy capital gains tax and lose a significant amount of money.  What are some options that I can present that will benefit both or is deal pretty much dead?

[Dave Foster]

@Hassien Serrano, If they have access to a source of cash from somewhere they can actually do both a seller carry back to you and completely defer all tax in a 1031 exchange.  The key is that they start the exchange at sale but instead of cash going into the exchange the note goes into the exchange.  Then during the exchange period they replace the note with cash from some other source - any other source.  At that point they now have cash in their exchange account and can complete the 1031.  They also have a note now outside the exchange which will provide tax free income (other than tax on the interest) since the recognized gain is left inside the 1031 exchange.