Download CAPITAL GAINS TAX DEFERRAL OPTIONS

CAPITAL GAINS TAX DEFERRAL OPTIONS
STRUCTURED
INSTALLMENT
SALE
PRODUCT
CASH
STANDARD
INSTALLMENT
SALE
1031
EXCHANGE
1031
TIC
EXCHANGE
PRIVATE
ANNUITY
TRUST
Can Capital Gains
Taxes be deferred?
Yes
No
Yes
Yes
Yes
Yes
Defer Taxes on
Sale of Primary
Residence?
Able to defer only
part of sales
proceeds/taxable
income?
Yes
No
Yes
No
No
Yes
Yes. Fixed annuities
can be used to
diversify sales
proceeds.
No
Yes
No. All
proceeds must
be reinvested.
No
No. All proceeds
must be placed in
trust.
Transfer of title
immediate?
Yes
Yes
No
Yes
N/A
Yes. Title transferred
to irrevocable trust.
Credit worthiness
of Buyer a factor?
No. Highly rated
insurance company
becomes the payor.
NA
Yes. Seller must rely
on Buyer’s ability to
pay.
N/A
Yes. Cash or
capital calls
are possible.
Payments are subject
to performance of
assets.
Buyer’s treatment
of property in the
future an issue?
No
N/A
No
Yes
No
Lock-in today’s
‘high’ selling
value/price?
Yes
Yes
No. Simply
shifted value
and risk of
lower value to
new property.
Yes
Yes
Payments must
begin by 70 ½?
No
N/A
Yes. Property is
collateral so if Buyer
defaults, Seller may
have to take back
neglected property in a
depressed market.
Yes, subject
creditworthiness of
Buyer. If default, risk
of retaking property or
accelerating payments
and losing tax deferral.
No
N/A
N/A
Yes
Ongoing or
additional
administrative
expenses?
No
No
Maybe, if Seller has to
chase Buyer for
payment or pay for a
letter of credit.
Yes
Yes. Ongoing asset
management fees and
taxes on the trust.
Can future
payments decline
or be missed?
No
N/A
Maybe, subject to
creditworthiness of
Buyer.
Yes. Costs
involved with
the use of a
Qualified
Intermediary.
N/A
Yes
Yes. Trusts do not
issue guarantees of
performance.
Flexibility in
designing future
payment stream?
Yes. May be life &
certain, joint life &
certain, certain only,
lump sums or any
combination.
No
Yes, but restricted by
Buyer’s ability and
desire to pay. Buyer
may not be able to offer
“lifetime” benefits.
No
Possible,
subject to
business cash
flows.
No. Life or joint-lifeonly payments.
Will deferred
monies earn a
guaranteed
return?
Yes
N/A
No. Subject to Buyer’s
investment returns and
position.
No
No
No
Provide benefits to
the Buyer?
Yes. Can bridge the
gap between asking
price and purchase
price.
No
Yes, but deferred
payments are subject to
Buyer’s ability to pay.
No
No
No
Note: Information listed here is not intended to provide legal, tax or investment advice. We recommend that you discuss these concepts
with your tax advisor prior to any sale of assets to determine which option most appropriately addresses your financial objectives.
Angel N. Viera, CSSC
CA Lic. No. 0D20706
STRUCTURED FINANCIAL ASSOCIATES
P: (323)-394-6609 F: (323)-887-9220