Explore Better Tax Options in a Ranch Sale

Ranches are worthy investments for those who need some space away from the city and wish to enjoy nature on their own. When the acreage is in the thousands and the location is just right, you will be treated to a vast expanse that is unimaginable. What if circumstances do result in you having to sell the property? The taxman may have some deferral strategies for you to consider.

One option is to do it through a 1031 exchange, which is an in-kind transaction. Some experts say the debt or equity in the old property should be equal to or more than that of the new ranch you’re seeking. Sometimes, 1031 exchanges involving ranch assets may involve lesser in-kind deals like a combine harvester for another. It will also defer the federal and state capital gains taxes until the replacement property is sold.

The second avenue is deferred sales trusts, which may be preferred if you’re no longer interested in putting the ranch up for a 1031. This option allows deferment of capital gains and non-accelerated depreciation recapture taxes, while the net proceeds are put into marketable securities with pre-determined payment schedules for the capital gains tax.

Selling the ranch but having to pay big taxes right away can be a drag. However, you can buy time for it.

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Posted on September 14, 2013, in Business, Real Estate and tagged , , , , , . Bookmark the permalink. Leave a comment.

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