Capital Gains from the person selling to me

[Andrew Grimmett]

Hello all! :)

Someone I reached out to on an off market deal told me that they couldn't sell because they bought the property as a rental in the 70s and didn't want to pay the capital gains. 

I'm curious if this has come up with anyone else and what I can do to help the seller in the situation to get the deal? Am I able to help pay capital gains? Is there any creative ways the seller can get around this by selling to me? 

Sorry if these are dumb questions, but I guess I never know unless I ask!

[Bill B.]

Make sure this enough gains to make it worth worrying about. I assume they paid $50k give or take 5- years ago. If they are selling for under $250k I might just eat it. That’s $30k in taxes. 

If they’re selling for a $400k+ gain they could look at a 1031 for:

A super nice 2-4 unit they wouldn’t mind living in a unit of where the rental portion exceeds their 1031 sale. 

A nice home they might want to leave to any heirs tax free in the future. Maybe that heir would rent it until then?)

A nice home that may some day make a bad rental but a good primary home 

An exchange in to a state without state income tax to save that 10% in state income taxes.  

Or. Do a tax free chasout finance. (Probably net more cash (75%-80) than they would from selling. (8-10% in selling costs, plus 15%-25% federal taxes and depreciation recapture, and 8-10% state income tax means netting only 55-69%.) and then Hold until they pass. After all if they’ve owned for 50 years they’re probably 75+ years old. Then avoid all taxes.