IRS - Defer Capital Gains Tax

IRS – Defer Capital Gains Tax

The rate for Long Term Capital Gains in 2013 (if you held your home for 1 year or longer) is 20% for Federal Taxes and 9.3% for California!  That’s a huge tax liability if you are considering selling your California home.

Tax exemption relief is set at $250,000 for husband and wife in the sale of their primary residence.  But if you have gains above $500,000 you would be subject to 25% taxes on the balance which would take huge bite if you were planning on those funds for retirement or future investments.

Let’s look at example of where the NET proceed of your home sale is $1,00,00!  The table below shows an estimated amount of $323,400 that would be due to IRS in December 2013.    Your exact tax liability will be determined by our Estate Attorney team during your FREE one hour consultation.

Long Term Capital Gains Tax

 Percentage Dollar Amount


  20 %   $200,000


  9.3 %   $93,000
Obama High Income Tax (income above $200,000)   3.8 % $30,400
Total Taxes: $323,400

If you are not able to utilize a Deferred Sale Trust, you will be cutting huge check for $323,400 to IRS at the end of the year!    However, there is a way out using a 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, 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 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 California 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.

Future payments are made to IRS as part of an 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.


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