Legally Minimize Capital Gains

[Jill McCann]

My mom and uncle inherited family property when my grandmother died 10 years ago. 

My uncle has lived on the land his whole life including after inheriting--it's his primary residence. 

The land is comprised of a few homes, barns, forest, and farmland. They have collected some income for having it logged years ago but that's about it.

They have accepted an offer on it and will be subject to significant capital gains. The offer is cash and from family so the deal can be structured a variety of ways. 

1. What are the best strategies to minimize taxes?

2. Is there a way to allow both parties to net the same amount of money after taxes considering my uncle will be able to reduce his liability due to it being his primary residence. 

Of note--one small piece of the whole sale is owned solely by my uncle and contains a house and about an acre of farmland. I mention this in case using it provides some option for tax savings. The offer is on all of the property together and the agreement is to split it all. Thank you!!

[Jill McCann]

Quote from @Bill B.:

Having a property that has gone up a million or more in 10 years is a good problem to have…

I don’t understand the part about gifting the rest…

Do you mean a relative is buying and the sellers would be ok with only receiving some money and gifting the rest of the property value to the relative/buyer?  If so, the downside is that relative/buyer inherits the seller’s basis so some day they will owe a bunch of taxes if they sell before dying. 

If this is the case there has to be a better lower tax version of it. Something like your uncle/mom get a cashout refi and the “buyer/relative” makes the payments until both your mom and uncle pass away and leave it to them? This is really an estate planner question. But it could save you most if not all the taxes and get your mom/uncle the money they desire. 

Sorry, I just re-read. You mean the buyer gifts the money to the seller to avoid the sale being too high and causing taxes? I don’t think so, that sounds like tax fraud. You could Try an installment sale. Something like buying the tax free portion and then making either interest only or interest free payments. (Which ever results in lower taxes.) and maybe the buyer could buy the tax free portion from your uncle and then make installment payments to your mom. 

 Thank you!

We've had so much trouble finding the right professional to help us with this. We've talked to about 10 different people--real estate attorneys, CPAs, etc. and each refers us to someone else so it's been frustrating. 

Good problem to have except they are terrible with money, have never had money, and I'm trying to help them and no one seems to be able to tell us what to do. 

We may just have to suck it up and pay capital gains but that is a lot of money and I'm having a hard time reconciling that. So, came here to see if there are other options we haven't yet considered. 

Thank you!