Real Tax Savings

[swsop]

Real estate prices may have peaked, which would make this a good
time to sell. However, an outright sale can produce a steep tax
bill. In additional to federal tax on long-term gains you might
owe state and local taxes as well as tax on any depreciation
deductions you've taken.

All of these taxes can be deferred by selling to a "private
annuity trust" that you create.

The trust pays for your property by offering you a lifelong
annuity.

Then the trust sells the property to a third party. If the amount
paid by the buyer is the same as the value of the private annuity,
the trust will not have a taxable gain and won't owe any tax.

Once the trust starts paying you the annuity, the tax bill you've
avoided will be spread out over your life expectancy. The income
you receive will come from a portfolio funded with the full
pre-tax sale proceeds.

SWSOP

[CheapShot]

So you basically sell the property back to yourself (Your Annuity Trust) how does the money in this annuity trust invested, while you draw from the proceeds, and who is the custodian of the trust? Seems very interesting, if you end up in a long term care facility, I assume the state or the facility would take the proceeds as you recieve them or can they go after the entire balance?

[Brett]

Where can I find out more about this? We are getting ready to unload a townhouse we own and have rented out for the past 20 years. I was just going to bite the bullet and pay the 15% cap gains and be done with it.

[hunters]

So, from what I figure here, you don't pay long term capital gains on the full amount all at once with this strategy. But you also don't get the 250k/500k automatic deduction either? And you get taxed as ordinary income on the amounts you receive monthly/yearly? Hmmmm. Not sure it adds up to a great thing?

Then again, I'm not a CPA.

Help me understand this.

[Mike]

Hunters - I think the point of doing it this way is for rental property.

Anyone thinking of doing it for the sale of their primary residence should:
a) Make sure they're exceeding the max deduction allowed by a wide margin, and
b) consult a tax professional first.