California Installment Sales

Installment Sales For Los Angeles, CA Real Estate

Due to inflationary appreciation of Ventura, California real estate, owners who purchased property in past years may hesitate to sell now because the increased value of their property makes them subject to significant taxes. If they paid their income tax on the full gain on the sale in one year, their tax could be so large that it would discourage investments in real estate.

Structured Sale

A structured sale is a special type of installment sale pursuant to Internal Revenue Code Section 453. An installment sale is the sale of real estate where the payments for the real estate property (commercial or residential) extend over more than one calendar year. Installment sales are used to spread a capital gain over two or more calendar years so that the entire capital gain is not taxed all in the first year. The higher the income the higher the income tax rate for that year. If a person can spread a capital gain over more than one calendar year, the same income may be taxed at a lower rate. By doing this, the seller avoids the disadvantages of paying for his or her entire capital gain in one year, and thereby has a substantial savings on his or her income taxes.

An installment sale is better than an 1031 tax exchange (Tax Deferred exchange, Delayed Exchange, Starker Exchange or whatever you would like to call it) or reverve mortgage because it fits the needs of the owner. An owner that needs cash now might want to consider a loan against the property or an outright sale and pay the tax. An owner that is unsatisfied with the performance of their current property but wants to continue to build equity should consider a 1031 tax-free exchange. The owner that wants to consider selling to CA TD Investments, Inc. is looking to dispose of their property, tenants, taxes, expenses and repairs and get an increased monthly income.

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