A PACTrust answer - Posted by Bill Gatten
Posted by Bill Gatten on November 10, 2000 at 20:06:21:
If you’d like to sell it to me…you could defer the gain as long as you?re willing to keep the land trust in force (I would take a beneficiary interest in your trust, rather than title to the property?that stays with your trustee).
Here’s what I (we) would do:
Place the property in a land trust with you as the only beneficiary
Take a partial assignment of your beneficiary interest, with an agreement that you’ll relinquish your interest to us when the trust terminates.
We would then lease the property from the trust.
We will then assign a portion of our interest in the trust and our leasehold interest to a 3rd party who will live in the property, make all payments and handle all costs of maintenance and upkeep (& HOA).
At the end of the trusts term (5, 10 15 years) , we either sell or refinance the property and pay off your loan and return any equity to you that you may have been carrying for that time (since you?re not taking it out you pay no tax on it?though you can borrow it out if you wish without a tax penalty).
At the termination of the trust, you may then exchange your interest in it for like-kind real estate under a delayed exchange (Rev. Rul. 92-105) and still defer your tax on your capital gain.
Now…though I’m immediately ready to do this with you…your best bet is to cut out the middle man (me) and deal with the resident beneficiary yourselves, and perhaps give him or her the 50% interest in the future appreciation (none of the existing equity). That way you get to keep all of your equity, PLUS half of the future appreciation, loan principal reduction, etc. You will also be able to receive a positive cash flow on the amount you are carrying as equity. But…then again?if its all too much trouble…I’m here, ready, willing and able (?able,? that is, if you don?t count my glass eye and the fact that both legs are shorter than each other).