Official seal of Town of Los Gatos

Official seal of Town of Los Gatos (Photo credit: Wikipedia)

The Long Term Capital Gains increased in 2013 to 20% for Federal Taxes and 9.3% for California making your total tax liability as high as 25%!!   Also, if you Adjusted Gross Income is above $200,000 you will be nailed by the State of California’s tax on high-income earners for about 3.8%.   Compounding the problem is that if you took depreciation as part of your typical deductions during your holding period, that amount would increase your Tax Liability as well.  

You will get some relief from tax exemption of $250,000 for Couples filing jointly in sale of their primary residence.   But if you have gains above $500,000 it could get ugly as you can see from the table below where you will be required to cut a $323,400 check to IRS at the end of 2013.  

Long Term Capital Gains Tax


Dollar Amount


  20 %



  9.3 %


Obama High Income Tax (income above $200,000)

  3.8 %


Total Taxes:



But there is hope!  And hope comes in the form of Deferred Sale Trust where the “seller’, the ownership of the property is transferred to a dedicated trust set up  to manage the sales transaction.   Since the are no funds exchanged during this transfer of assets, it is not considered a taxable transaction.   The  Trust then sets up special payments as part of “installment Sales Contract”.   These payments could begin immediately after the sale of the assets or deferred (hence the name) for some period of months or years. Once the Asset is sold, there are ZERO Capital Gain taxes due on the Trust since the Trust purchase the Los Gatos property for the SAME price that it sold it to the 3rd party. The owner therefore is subject to ONLY subject to Capital Gains taxes on the amount they immediately receive from the final sale to the 3rd party.  

The future payments are made to IRS as part of an easy installment plan and since these payments are made with depreciated dollars, the owners end up paying much less in taxes that they would have if they sold without the use of a trust.

We can schedule a FREE one hour consulting with an Estate Planning attorney who can explain your option.  We will also give you a Free Appraisal Report on your home’s value in Today’s market which will be used by the Estate Attorney to determine your Capital Gains Taxes when you sell.

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