Bob Nelson – Tax Deferrals

Right now, we’re going to talk about tax deferrals.

Featuring:
Bob Nelson, Eugene real estate investment broker

Bob Nelson: I’d like to speak this evening dealing with the concept of deferring the capital gains tax that would otherwise be paid when you sell an investment property or property that you’ve used in your trade or business.

It’s an interesting process, and of course, everybody’s pretty much familiar with the term 1031. It’s a section of the Internal Revenue Tax Code, Section 1031, that deals with how we do this particular thing.

Now, I got to tell you, if you have the legal opportunity to defer the tax that would otherwise be paid until some time into the future, what you’re doing is using all of your equity forward into the next property with the idea that there will be additional profits made with that equity rather than being handed over to the government, both the state and federal, that would make it opportunity for you to pay your tax more easily.

Now, of course, that’s the concern. If you dealt with the ultimate tax deferred exchange process, you would own the property until you died. At which point, the gain that would have been otherwise due on date of death, is gone. It simply vanishes. It becomes part of an estate issue. I mean, you don’t get off Scott free, but all of the tax deferrals have been wadded up into a ball, and they simply vanish as the property then goes to your designated heirs or however you have chosen to deal with it.

If it’s inside of a trust, it didn’t die with you. It just continues on with the trust. Same situation though. It’s an interesting situation that allows you this chance to manipulate the use of your equity. The equity is the only thing that you have in that property. Whatever it would sell for minus the amount of debt that secures that property is your equity. And your objective is to grow the equity to a point where it provides benefits upon your retirement in cashflow, continued equity growth, safety and so forth to supplement whatever other retirement assets that you might have. But that becomes absolutely critical.

So it’s end game planning, and I’m really good at that. I would be glad to help you. Give me a call, and we’ll go from there.

Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30 on KPNW for the “Real Estate Today” radio show.