- Telluride Realty &Investment explains 1031 tax exchange and Deferred Sales Trusts.
Hello, this is John Janus with Telluride Realty & Investment, and today I would like to share with you a tax-deferred option that not that many people know about. It seems like everybody’s heard about a 1031 tax exchange, and they work fine. They’ve been around for a long time. They’ve been good, but I would like to save you some more money. Now, if you’re thinking about buying or selling a home, condo, land, commercial property, a farm or ranch in Telluride, Ridgway, or the Western Slope of Colorado, Telluride Realty & investment is your number one source for all things real estate.
Now, generally speaking, when you sell a home or any property in Colorado, the escrow company will cut you a check. You put that check into your bank, and now you have the liability of those capital gains. So, what we’re trying to do here is to find a way in which we can offset those capital gains. So here’s one way that is used by many of my clients. It’s called a Deferred Sales Trust. So from an investment property standpoint, if you want to avoid paying the taxes, we need to create a way where we don’t take possession of the money. With the Deferred Sales Trust, we place the property in the trust. The trust sells the property to a buyer. The buyer brings money to the table, that is the closing table, then the escrow company cuts a check to the trust, not to you.
So, for instance, if say Biff and Betty, they bought a house in Telluride back in the day for $250,000. Now they’re looking to cash out. Their home is now worth 1.5 million. They both are qualified for the $250,000 tax exemption. That leaves them with a tax liability of $750,000. Now, what they can do is they can take a loan out for $500,000, the loans are tax-free. They don’t sell the property, but rather the trust sells the property. Then at escrow, the title company, escrow agent, will take the first $500,000 and pay off the loan that Biff and Betty took out. Then the remaining 1 million will go into the trust account. $1 million placed into the trust account can provide a nice passive income for Biff and Betty for many years to come.
This strategy can be used on all types of real estate, homes, condos, vacant land, farms, ranches. Most agents don’t understand what a powerful tool this is for their clients, but we at Telluride Realty & Investment know that there are many people out there who really would and could use a program like this though they don’t know that it exists. Telluride Realty & Investment has the complete team. We have the trust attorney, we have the tax attorney, the CPA, the financial advisor, everybody that you might need to buy property here in Colorado. For more information or a confidential consultation, please call me John Janus at Telluride Realty & Investment, your Telluride, Colorado, real estate expert.