All Forum Posts by: Lawrence S.

This per Dr. Makary.

Actually, the 1/2 million to a million is the upper range.  The lower range could be as little as 20,000.  We won't know until we start testing.

I think that one of the most credible voices on coronavirus is Dr. Marty Makery of Johns Hopkins (which you can see no Youtube). (However I am not a medical professional).  He believes that the Chinese and Iranians haven't been transparent about their real numbers.  However, Italy and Korea have been 100% transparent and helpful.  Korea has already tested over a quarter million people.  Based on their numbers his projection for the United States is that we will have 1/2 million to a million cases before this is done.  And his advice is that we need to hunker down at a minimum for 3 months.   He doesn't believe that the CDC has so far not been specific enough in its guidance and should have been more aggressive in demanding business and schoool closures.

So, I wonder what is possible consistent with IRC 453 (for installment sales). This derives from a close reading of IRC 453 and/or Publication 537 (which deals with seller financing).

1. If the buyer doesn't want to do a seller finance, can you just buy trust deeds during escrow to substitute for it? Or is it going to be considered all cash since you have constructively received it?

2. Or again if the buyer doesn't want to do a seller finance, can you take the cash, buy properties then rent them out during escrow?

3. Or do you need to have the original buyer to do a seller finance for one day and then restructure it, possibly by walking the financing to another property?

The problem that I am seeking to resolve is if the buyer only wants to pay all cash----doesn’t want to do a seller finance---is there any way around this problem?

These approaches might seem counterintuitive, but even if the original buyer did agree to a seller finance the law indicates you can substitute another buyer if they either want out or default on their obligation.

Does anyone know how to structure this? Could you do this if you involved a 1031 company?

Thanks

In my experience, those who tend to like the DSTs, and this type of solution, tend to be those who are 75 or older without a spouse or significant heirs and who are just looking to postpone the taxes beyond their likely life expectancy (recognizing, however, that this is an ever increasing target in some instances).

One defect here is that you are totally out of control.   And I agree with of the tax professionals that these kind of strategies are risky at best.  Given that the transactions seems so utterly imprudent to many here that this only serves to reinforce the idea that it was motivated solely for tax avoidance.  As with the DSTs, it's a great deal for those receiving your money---but very marginal and conjectural for those selling out.

Why not a straight installment sale?  It's not perfect---you will realize recapture of depreciation taxes immediately even if the remainder is deferred.  But at least you can foreclose on the property if the buyer defaults so that you have SOME security.

I have another scenario.  Can the carryback financing be pulled off where the buyer buys an annuity that will fulfill the financing promise to the seller?  What is the advantage of this?  The problem with a seller carryback is what if the buyer decides to sell or refinance?   Yes, you can try to make your financing attractive to the buyer but you probably can't necessarily stop this from happening.  And if either occurs (sale or refinance), then the seller would be forced to pay taxes at that point.  (If the buyer were more sophisticated, maybe you could walk the mortgage, but let's assume most buyers won't, or maybe they don't have another property that would make sense).  My question: So long as the annuity continues to pay, the seller finance has accomplished its goal of postponing taxes pursuant to IRC 453.

Thanks for your post, in any case.  Maybe I misunderstood, actually.

I think your point is that if the loan payments are interest only (not fully amortized), then depreciation recapture would be postponed.

Actually, I never thought of that distinction----I don't know whether that would affect the outcome or not.  It's an interesting idea---Thanks for posting that.

Thanks for your contribution.  But I don't think that I can postpone the depreciation recapture unless I do a full fledged 1031---an installment sale alone pursuant to IRC 453 will NOT help with that IMHO.

The other question concerns the status of (1) "monetized installment sale" or (2) "structured installment sale" or the like.  I have talked to some CPAs who are not 100% sure that the IRS approves of them.   

Do you know otherwise?

I DO know that there is an entity called a "deferred sales trust"---that is flogged by one organization in particular----that is one I would AVOID.

These 2 notes do NOT need to last forever----only to get me above the hump of the next market crash.

After the market crashes, maybe I can trade both notes to buy another property---at least, there will be properties for sale for more reasonable prices.

Basically, what I am seeking to do is to exit the market WITHOUT doing a 1031 exchange---and WITHOUT paying alot of taxes.