Need Tax Help Fast For 10M Deal!
Here is the scenario:
An option on some properties that was less than $25,000 is about to be cashed in for 10 million.
OF course keeping as much as possible and avoiding uncessary taxes is paramount.
One thought has been to assign/sell one of the options to a self directed Roth IRA prior to it being exercised or paid out.
This would definately fund the IRA with a lot of money that could be used for future hard money loans and would avoid tax on the part that was in it.
Another strategy is to put it all in the the Roth and then take anualized distributions out of it for life.
Do any of you know who is a great attorney or tax planner that has a comprehensive program for this? NOt just one that you can buy but someone that you can actually talk to?
Thanks!
[addsig]
Call a local estate attorney and ask about a Charitable Remainder Trust.
[addsig]
Thanks, I will look in to the charitable remainder trust. The only other way I could see avoiding taxes is through the self directed roth by having it buy the property or the options.
But it would be good to get some $$ now not just in the future through the retirement plan....
[addsig]
You have to be careful of self dealing issues with an IRA vehicle. If you are in essence assigning the option to your own IRA account it could be disqualified.
You CANNOT sell an asset you own into a ROTH IRA to prevent taxable gains, legally. You would have had to had the money in the ROTH IRA and have bought the asset directly into the Roth IRA.
What entity are you holding this option in? Just your personal name, an LLC, or a corporation?[ Edited by dnvrkid on Date 02/25/2007 ]
Maybe this should be another thread
what is so desirable w/ the CRT.
My complaint w/ the structure is that one has to make a charitable donation as part of it, and ergo that value is longer available
Quote:
On 2007-02-24 16:18, LeaseOptionKing wrote:
Call a local estate attorney and ask about a Charitable Remainder Trust.
The entities that are holding this are corporations..
Congratulations on a home run!
Assigning the option that you already own to your IRA is a prohibited transaction. It is considered to be self-dealing. Have your tax advisors review the corporate entities to determine if there are any related party/self-dealing issues to be concerned about (depends on shareholders and percentage ownership).
1031 exchanges are not permitted on options. You do not own the real estate, you own an option.
Charitable Trust could work, but is permanent and eliminates flexibility. It does have great tax and financial benefits.
[addsig]
How did it go... what ended up happening?
How did it go... what ended up happening?
Client would probably need to get a Private Letter Ruling from the IRS to get an exception, and there would need to be a compelling reason to grant it. The obvious answer is move up the closing date. I suggest you tell your client to talk to an experienced tax professional ASAP with the records of the relevant dates.
How does transferring the property to an LLC gain a 6 month extension to complete a 1031 exchange?
I have never heard of an extension for a 1031 exchange. Can you give us more details about the structure of the deal? What is this loophole all about?
There are no extensions available for 1031 exchanges; not even with a Private Letter Ruling (PLR). (side note: PLRs are also taking 9 to 12 months to obtain at this point and are extremely expensive, so they are usually no help).
Please provide more details regarding the transaction and what the client was trying to accomplish with the LLC.
[addsig]
You can not obtain an extension via a PLR. The IRS does not have any authority over the 45 and 180 day deadlines. They are in the tax code and not the tax regulations.
[addsig]
Bill,
You are correct, IRC §1031(a)(3) lays out the days in the statute. Should have looked it up before disagreeing with you. There only alternative was to meet thh deadlines.
You need to interview a few, find someone who owns real estate her/himself, preferably more than just a few rentals here and there. Ask them for their favorite deduction they find for their clients who do RE deals. Ask them how they deduct the payments made to the bank on a Sub2 deal. Get a sense of whether they really understand REI, or would just subtract your expenses from your income and come up with a number.