Motivated Seller, How to Avoid Long-Term Gains Tax?

[Account Closed]

I have a scenario for a potential purchase. Basically the guy bought his house a longggg time ago for $20k and wants to sell, and we agree on a $450k sales price. Is there a way to pay him $270k "on paper" so he doesn't get hit with a long term capital gains tax at 15% and then pay him the remaining balance of $180k over time through a consulting agreement or other instrument where he would avoid the tax. On top of that, could I set my basis at $450k when I sell it? I wouldn't want to do him a favor to avoid tax, but then have my basis be $270k and then I get hit but a huge tax bill when I sell for say $550k, which would wipe out my profits. Is this above board or is there another way to approach this?

[Curtis Bidwell]

@Account Closed Many tax advisors will add a given umber per year that they feel they can justify and defend.  I would ask if he ever remodeled a room (kitchen, bath), did an addition, repaved a walkway, built a garage, rewired/plumbed, put on a new roof, re-landscaped, etc...

If he's married there is no issue, he's already below the threshold.  If not, then start adding up improvements. 

As an example: His net proceed on $450k will be around $436,00 after transfer tax and closing costs.  Subtract his purchase price of $20k, subtract improvements ($2500/yr x 40 years = $100k), now your around $316k and he gets a $250k deduction.  He's taxed on only $66k.