Win/Win example #4 - Posted by John Behle
Posted by John Behle on January 12, 1999 at 22:11:00:
Lady I run into asks me what I do. One of the hardest questions to explain. I usually just say mortgage banker. She says “I hate you guys.” “I can’t sleep at night because of you.” I’ve always wanted a woman to say that to me, but this wasn’t how I envisioned it.
She explained that she had sold a property about year ago at 70% of value with 10% down and a 30 year note (seller financing). She sold it that way because she could not afford any more taxes (sometimes even millionaire property owners don’t get it about taxes and real estate).
Now the buyer had fixed it up a little and was going to sell the property. She couldn’t sleep because of the tax damage she perceived. Her basis was almost zero and she believed she would lose 50% of what she received to Uncle Slam and the Infernal Revenue Service.
I explained to her two ways to avoid her capital gains problems even right now. One involves charitable trusts. One is a technique that I think only I and one other person in my state new - because I had developed it and shared it with him. I call it the “Installment Sandwich”.
I work it out to assume their position in the note and using a substitution of collateral technique, I receive the cash and she maintains the installment sale. I get investment capital at 9% and they save tens of thousands in taxes.
To me that is a Win/Win for everyone but the IRS and I figure it works there too, because I would just as well not see any of us feed their viscious machine (legally) whenever possible.