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Case Study: Commercial Office Buildings

Problem

The owner of two office buildings with a combined value of $14.9 million wanted to sell but faced a major problem. After costs of sale and paying the $12 million mortgage debt owed, he would not have enough to pay at close of escrow all the total taxes due, totaling $4.5 million. Consequently, he would be forced to pull out of pocket more than $2.0 million to pay off the balance owed to the IRS and state.  Included in this problem was the Debt Over Basis tax issue that alone triggered $2.0 million of the total amount of taxes owed.

TaxWealth Solution

By coupling a monetization loan with an Installment sale, the two buildings are sold for $14.9 million, sale costs are paid, the $12 million mortgage debt is paid off without triggering the taxes due for Debt Over Basis and the $4.5 million in taxes are deferred for decades.  In addition, the seller receives at close of escrow more than $1.5 million tax-free to reinvest however he chooses.

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