Minimizing Capital Gains - Farm Land
I would like to buy a farm from an elderly friend who has offered to finance the purchase through a seller financed mortgage or contract for deed. I need this financing help, but I have to consider the capital gains implications for him. What is the best way for a seller to effectively finance a sale while minimizing capital gains tax?
CBoessen:
Nice to meet you.
The Seller may be able to structure an instalmment sale visa via a Transfer of title into a Living Trust and arranging to have you Manage the Farm along with a Lease Agreement + some kind of Option to purchase in 1, 3, 5, or 20 Years(max for Trusts)
The deal could begin with you and the Seller determining ta MAV(mutually Agreed Value) TODAY... along with a %-age split on the Future Appreciation (if any)will be handled.
His taxable gains can be deferred even long after the elderly Seller lives cuz...
The Trust avoids Probate and a simple Transfer of his beneficial interest (MAV+Appreciation-if any) will belong to the heirs as well as the TAX Bill once you pay them off.
Does this help?
I Hope So!
Best of Everything to you!
Derrick Ali
A deal qualifying installment sale treatment would be sufficient to spread out the seller's capital gains liability.
The rest of the structure described may be helpful for estate planning purposes or necessary to effectuate resolutions to control issues, but are not strictly necessary from a tax perspective.
I would ask if the seller has owned and lived on the farm for at least 2 years. He may qualify for an exemption from tax for his personal residence.