Helping a seller reduce their tax consequences

[Ronald Perich]

I really want to provide my seller with some options to reduce the taxes they'll pay if they sell me their property. By helping them solve their problems, perhaps I am their first choice for the sale. Here's a quick synopsis of their situation.

They've owned these units for roughly 20 years. Assume today's sale is at $300K. Originally purchased for $250K. (Yep, there is little appreciation in this area).

Improved Property basis is probably around $200K (for depreciation purposes). The biggest hit in on the recapture of depreciation (which I believe is at 25% tax rate). They have to reduce their basis by the $145,000 of depreciation they've taken over those years. So their real basis in this property stands at $105,000. Their resulting gain in the property is $195,000.

In terms of taxes, I figure their recapture taxes will be $36,250 (25% of $145) while the remaining capital gain is taxed at 20% for a bill of $10,000. 

Add to that a decent salary for the owner.

How can I help them reduce the taxes? Or maybe delay when they pay those taxes?

A master lease option (something @Brandon Turner has talked about) is not a sale until the option is exercised, right? Maybe we do that and delay the actual sale until next year (when their personal income is less)

Amanda Han talked about seller financing as another option. But I think the recapture has to be paid at the time of the sale even when using seller financing.

Perhaps they put it into an LLC and I slowly acquire ownership of the LLC. Not even sure how the taxes are figured on that one.

So I am looking for some options. I realize none of what you will offer is specific tax or legal advice and I should seek the recommendations of a qualified tax or legal specialist. Thanks for the help!