I love your new book, I was one of the first few who pre ordered it. I finished it already and I have to say , it was easy to read, easy to digest, one of the best RE lawyers in the game. THANK YOU CLINT COONS!
Would a DST work to defer taxes on ordinary income from say flipping properties and using the trust to invest in more properties? Pls explain more on how to borrow against it?
If there is a mortgage on the property from the seller end then are you assuming they would have to pay that off at the closing? I know mortgage will not have tax impact but it will have a significant financial impact on the seller where they would have to pay off the mortgage at closing.
Hey Clint. Would this complex trust strategy only work for real estate or does it work for other assets like cryptocurrency or private company stock too? Do I have to wait 2 years before selling for those other assets when doing this as well?
Thanks Clint, helpful strategy. Would the seller still have to recognize depreciation recapture income on the installment sale whether sold to an entity or a complex trust? I assume so.
Using your example - If the property is sold via "Installment Sale" to the Complex Trust, would the seller need to file with county the "change of ownership" which would then be subject to County Transfer Fee tax on the $10mm? Or would the conveyance qualify for Exemption?
It would depend on the county and the exemptions. You are selling it for tax purposes but you at the same time you are deeding it to a trust where you children are the beneficiaries. If the county exempts these transfers regardless of the consideration paid then it might be.
Property tax has nothing to do with this strategy (this has to do with federal taxation). Your property tax will be based on the assets value when you close.
Not seeing how this an alternative to a 1031 if your goal is to take the proceeds to buy a more expensive property. Further more how is one to get out of their current property, pay off their mortgage to be able to loan themselves back the money.
The tax goal of a 1031 exchange is to defer taxes. This is somewhat doing the same. You are delaying paying the taxes all at once. Plus with a 1031 exchange if you receiving cash or if you’re mortgage is paid off and the replacement property is less than the relinquished property, you may have to pay taxes on this as they are considered boot. Further, you can’t immediately cash out on a 1031 property for its equity. That can be considered a taxable instances related to the exchange. The focus with the IRS is intent
I love your new book, I was one of the first few who pre ordered it. I finished it already and I have to say , it was easy to read, easy to digest, one of the best RE lawyers in the game. THANK YOU CLINT COONS!
Thank you so much!
Love your complex topics! Thank you!
Glad you like them!
Good afternoon coach!!
Hey there!
Would a DST work to defer taxes on ordinary income from say flipping properties and using the trust to invest in more properties? Pls explain more on how to borrow against it?
It would not because the flip properties are not considered investments but inventory.
If there is a mortgage on the property from the seller end then are you assuming they would have to pay that off at the closing? I know mortgage will not have tax impact but it will have a significant financial impact on the seller where they would have to pay off the mortgage at closing.
No but they will need to roll the debt into the replacement property.
Hey Clint. Would this complex trust strategy only work for real estate or does it work for other assets like cryptocurrency or private company stock too? Do I have to wait 2 years before selling for those other assets when doing this as well?
Real estate only
Can we do this with land? bought land 3 yrs ago and it has appreciated. Planning to sell the land and use the profit to buy a owner occupied home.
Yes
Thanks Clint, helpful strategy. Would the seller still have to recognize depreciation recapture income on the installment sale whether sold to an entity or a complex trust? I assume so.
Yes
Using your example - If the property is sold via "Installment Sale" to the Complex Trust, would the seller need to file with county the "change of ownership" which would then be subject to County Transfer Fee tax on the $10mm? Or would the conveyance qualify for Exemption?
It would depend on the county and the exemptions. You are selling it for tax purposes but you at the same time you are deeding it to a trust where you children are the beneficiaries. If the county exempts these transfers regardless of the consideration paid then it might be.
I agree with everything you said except 1 part at the end of the video …
WHAT IF after waiting the 2 years I want to sell the house ?
Then the gain runs to the trust and its beneficiaries.
@@ClintCoons How would a lease with option to purchase look thanks
@@realtorjameschurchI would avoid a LO until the 2 years run. Not worth the risk it gets audited as a disguised sale.
@@ClintCoons oh ok, and thanks so much for the reply 🙏🏼
If the basis is stepped up, won't that increase property tax substantially?
Property tax has nothing to do with this strategy (this has to do with federal taxation). Your property tax will be based on the assets value when you close.
What happens to the gain after the trust holds it for 20 years?
It would be taxable when distributed.
How many dollars in tax liability are we talking about in order for this setup to be worth doing?
100k or more.
Question... what if you don't have kids to be the beneficiary? We have a C corp that owns the land, could the owner be the beneficiary?
No you would need to set it up with some other beneficiaries.
Not seeing how this an alternative to a 1031 if your goal is to take the proceeds to buy a more expensive property. Further more how is one to get out of their current property, pay off their mortgage to be able to loan themselves back the money.
The tax goal of a 1031 exchange is to defer taxes. This is somewhat doing the same. You are delaying paying the taxes all at once. Plus with a 1031 exchange if you receiving cash or if you’re mortgage is paid off and the replacement property is less than the relinquished property, you may have to pay taxes on this as they are considered boot. Further, you can’t immediately cash out on a 1031 property for its equity. That can be considered a taxable instances related to the exchange. The focus with the IRS is intent