We are now aware of the many changes in our tax laws which began implementation in January 2013. Much of the new tax legislation affects land owners who are working with Ranch Marketing Associates (RMA) to sell and purchase properties. These laws mandate hiring 16,000 additional new IRS agents. These agents work to uncover opportunities for the IRS to receive additional tax money from the increased capital gains tax and other taxes related to the sale of property. Therefore, it is important to RMA that we assist our clients by doing everything possible to reduce or defer taxes when selling a property.
Ranch Marketing Associates understands the constantly changing economic environment and the effects some changes have on our clients. We are vigilant in staying current with the changing tax laws in an effort to provide sound advice.
One of the many important opportunities which allows land owners to defer taxes is the Deferred Sales Trust (DST). The DST was created to allow sellers of highly appreciated real estate to defer the capital gains tax, state tax and some if not all of the depreciation recapture on the sales proceeds for as long as the seller would like. The DST works well when a seller is not interested in a 1031 Exchange. Therefore, the only option when “cashing out” is to pay taxes. The DST can provide an attractive alternative to the seller by allowing him/her to defer those taxes as long as they want.
A second opportunity which exits is when a seller wants to transact a 1031 Exchange but, for whatever reason in the 1031 time line, the exchange falls apart and becomes an immediately taxable event to the seller. The DST may be an attractive Plan B when the exchange fails. Instead of the seller receiving the sales proceeds which becomes taxable, the proceeds are sent to the DST and do not become immediately taxable as well as keeping our client in a position to purchase more real estate.
When working with CPAs and attorneys all over the country, additional opportunities tend to be identified using the DST. Ranch Marketing Associates is one of the few brokerage firms in the country which has the knowledge and experience to provide this opportunity to our clients and provide assistance through the process. However, every client’s situation is different, so it is imperative to work with your tax and legal advisers to determine if the DST is a viable option for you to defer taxation.
Winston Churchill said, “To build may have to be the slow and laborious task of years. To destroy can be a thoughtless act of a single day.” Land owners work hard to build value in their property. RMA works diligently to make sure our clients keep what they have worked so hard to accumulate.
Article by David S. Fisher of Creative Real Estate Strategies