Capital Gains Deferral Strategies Gives Real Estate Investors The Freedom Of Choice
While the 1031 deferred exchange is a viable means for some real estate owners and investors, many are finding the stringent requirements and the lack of quality properties a barrier to successful completion of a 1031 exchange. With long term tax deferral as a primary objective, many real estate investors are looking for other options to help them eliminate current capital gains taxes.
Though less than 10% of investors are aware of it, the Private Annuity Trust is quickly making its way into the mainstream as a way for investors to not only avoid current capital gains taxes, but also a secure way to protect assets and create a lifetime income.
Affording time to make solid investment choices
Investors don't want to hand over 30% of their profits to the government when they sell their property. Eager to defer taxation, many investors jump into deals before they're ready or initiate transactions that don't provide them with any additional financial benefit simply to avoid capital gains tax. With a 1031 deferred exchange, the property must be identified within 45 days and purchased within 180 days following the sale of the original property.
The Private Annuity Trust puts the power of choice back in the real estate investor's hands, providing the flexibility to invest in good deals when they arise. With a Private Annuity Trust, capital gains tax isn't owed until the money is distributed as lifetime income from the Trust. That means that while you're looking for a profitable real estate development opportunity, the money you would have paid to Uncle Sam is earning interest in the Private Annuity Trust.
Like kind? Affording the freedom to invest in what you choose
One challenge that real estate investors face with the 1031 deferred exchange is "like kind" clause. A 1031 exchange cannot be used for real estate outside of the United States. However, many real estate investors are setting their sites on retirement homes in other countries so a 1031 is not a viable transaction for them to help with tax deferral.
Also, primary residences are not covered by 1031 exchanges, and many homeowners now have significant gain that will be taxable when they sell their home. With a Private Annuity Trust, you have an opportunity to keep all the proceeds from your sale and create a balanced investment portfolio that will fund your lifetime income stream. You have the flexibility to begin taking payments immediately or to defer payments until you need the income.
When are the capital gains property taxes due?
With a Private Annuity Trust, capital gains taxes aren't due until the money is distributed to the seller. Because the Trust agrees to make lifetime payments, capital gains tax is paid incrementally over the seller's lifetime as well. For example, if a real estate investor sells a property through a Private Annuity Trust, the entire profit from the sale, including what he would have had to pay for capital gains tax, remains in the Trust.
As long as there are no annuity payments made to the seller, there is no capital gains tax payment due. The proceeds from the sale and the amount owed for capital gains property tax can remain in the Trust collecting interest until the Trust payments begin.
The Private Annuity Trust benefits real estate investors in the prime of their investing careers by giving them the freedom to decide when, where, and in what they will invest their earned money. For many investors, the Private Annuity Trust has been a critical piece to safe, smart, investing.
Related Tags: investment, exchange, estate, real, 1031, trust, annuity, private
Author is a freelance copywriter for QA Plan. For more information, visit http://www.qaplan.com.
Your Article Search Directory : Find in ArticlesRecent articles in this category:
- The Beginning of the Cataloging Code
The first significant cataloging code was published in 1841. The realization that cooperation and s - In the Lap of the Gods 24
Life moved on. Lily became well liked by both students and staff because of her cheerful outlook on - In the Lap of the Gods 23
Does fate decide the future? Is it all mapped out for us, predestined, or can we influence what com - Write Your Memoir: How to Write About What Troubles You the Most
Everyone has a story to tell, and unfortunately those stories aren't always pleasant. What makes me - How Crafty Word Order Can Instantly Improve Your Writing
by Philip Yaffe I am usually very reticent about offering writing tips. Unless they are linked to - You Say Grandpa, I Say Deda
I was born with two grandmothers but only one grandfather. In nature's rules of familial supply and - My Russian American Dichotomy
I was a Russian girl and an American teenager. I had no choice about the first but I tried very har - In the Lap of the Gods 22
This is just an explanation for those who have read some of the other Chapters of, "In the Lap of t - Write a Book: 8 Reasons You Should Do it
Studies have shown that 82% of people want to write a book, but few of these actually ever achieve - Book Review: the Book of Common Prayer
Book Review: The Book of Common Prayer, "My carry-with-me copy is this size, and I recommend it for
Most viewed articles in this category:
- Real Estate Investment - Investing In Commercial Properties
As in any other type of investment, its obviously advisable to do your research well so that the pro - Taking Care Of Acne Prone Skin With Proper Skin Care Products
Although acne has been largely associated with teeners and puberty, the condition is not only confin - Do I Really Need Eight Hours Of Sleep Each Night?
What if you were told that there is no definitive answer for why we need to sleep? Your initial reac - How to Improve Your FICO Credit Score
If you didn't know this already, having a good credit score is more important than having a lot of c - 10 Tips for a Magnificent Memory
"Where did I leave my keys?" "What did I come in here for?" "Your glasses are on top of your head!" - Things You Might Like To Know About Card Companies
If you have a regular income and are 18 or over then you may be able to get a credit card. You will - Bad Breath in Babies and Toddlers
If your baby or toddler has had bad breath lately, not to worry. There are plenty of things you can - Starving College Students No More
The majority of today's college students are extremely Internet savvy. In fact, many of those studen - Cosmetic Surgery Financing: How Can You Get It?
Cosmetic surgery, a branch of plastic surgery, can be quite expensive, especially if you are plannin - Article Marketing, Improve Your Ranking With Links
Article Marketing, without a doubt remains the best free formula for attracting website traffic. At