Structure a sale to avoid taxes upon death of seller?

[Jon Schwartz]

Hi all,

I'm in an interesting situation. Long story short, a 94-year-old woman has expressed interest in selling me her $2M duplex (in a very nice area of Los Angeles, hence the $2M price tag). I haven't dug into her motivations yet, but I can think of 20 reasons why she wouldn't: her adult children and adult grandchildren.

What I do know is this: if the potential seller put her duplex into a trust and named a beneficiary, the beneficiary would inherit the duplex with a stepped-up cost basis. He/she could sell it immediately and pay basically no taxes.

A few other facts I know: the potential seller owns the duplex outright. She resides in it. She owns it in her own name, not in a trust. She's owned the duplex for 49 years, so her cost basis must be $100k, if not less. She owns other property nearby, so I believe she's financially comfortable.

Here're my questions: how can I structure the sale such that the potential seller and/or her children aren't stuck with a huge tax bill? Is there a seller-financing option that reduces the tax bill if her children inherit the note? Is it possible for her to put the duplex in a trust, sell it to me, and then keep the funds in the trust until a beneficiary takes over the trust? And what the tax implications there?

Any advice from a knowledgable tax specialist would be greatly appreciated! I don't want to buy this duplex if it's not in the selling family's favor in some way, so I want to come prepared with some win-win scenarios.

Thanks so much!

Jonathan