Cash Out My Ex-Spouse

Debbie and Allen aren’t getting any more. “Irreconcilable Differences” have ended the marriage. Allen needs monthly income to finance his latest interest and Debbie wants to remain invested in rental property. They have owned their current rental property for twelve years.

Problem:

The property was purchased for $100,000 and depreciated for tax purposes. It is now worth just over $800,000 after selling expenses. If Debbie and Allen sell they will owe nearly $192,000 in taxes and after they pay the remaining mortgage they will keep only $298,000 each.

Solution:

CATD purchased the residence from Debbie and Allen from their 1031 accommodator for $385,000 cash and a $385,000 note, assuming the existing $30,000 note. Debbie was able to complete her exchange, investing her full equity of $385,000 in the new property; an increase of $87,000 over the amount she would have gotten upon a sale.

Allen will receive $2,245.00 per month, on the $385,000 principal invested, for the next ten years. Thereafter he can negotiate to renew the note or accept the principal and pay the capital gains tax a full decade after the sale.