Avoiding Capital Gains On Appreciated Assets

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					  Avoiding Capital Gains                                                                  Sandeep Varma




  On Appreciated Assets
  By Sandeep Varma




  Even after the recent drop                                                                   Let’s look at an
  in real estate prices, many                                                                example. A 74-year-
  people still own highly                                                                    old couple owns a one
  appreciated real estate                                                                    million dollar rental
  these days.                                                                                property that’s pro-
    It might be a primary                                                                    ducing $30,000 net
  residence or rental property                                                               income after property
  they’ve owned for 20 or 30                                                                 taxes and expenses.
  or more years. The rental                                                                    That’s a 3% yield
  property may have a low                                                                    on the million dollar
  basis and may also have been                                                               investment. If the
  depreciated over the years so                                                              property were sold
  that a sale would bring a huge                                                             outright, there may be
  tax cost in recapture of that deprecia-                                                    less than $750,000 left
  tion and in capital gains.                                                                 after state and Federal
    Unfortunately, many of these owners are at an age                                        taxes are paid.
  where they no longer want to deal with the property         The CGBT could be set up to pay 8% income which
  and may need higher income than the property is           would be $80,000, a huge increase in income for the
  producing but they still have to deal with the three      owners. As with any strategy like this, appropriate tax,
  “T’s”—tenants, trash and toilets.                         legal and financial advisors should be consulted.
    There is another strategy that is often overlooked.
  The Capital Gains By Pass Trust (CGBT) is a viable        Sandeep Varma is the owner and President of ATS Advanced
  option for many people. Property transferred into this    Wealth Strategies in Menlo Park, CA. He is a registered
  trust can be sold with no capital gains taxes and no      representative with and offers securities through LPL
  taxes on recapture of depreciation.                       Financial, Member FINRA/SIPC. He can be reached at
                                                            650.243.2224 or Sandeep.v@atsfinancial.com.
    The proceeds can then be invested with the trust
  often generating two or three times the income that the
  original property was generating. This income is paid
  to the income beneficiaries (the property owner).




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posted:9/7/2011
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