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Essay / Research Paper Abstract
A 3 page paper discussing how an individual might defer capital gain tax on the sale of appreciated land, spreading the tax liability over several years. The paper recommends the structured sale, a variation on the IRS-defined installment sale that as of early 2007 has not created any IRS objection. Bibliography lists 4 sources.
Page Count:
3 pages (~225 words per page)
File: CC6_KSacctTxPlnLnd.rtf
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Unformatted sample text from the term paper:
investment land ($690,000 FMV and $228,000 adjusted basis) that he" wants to sell but on which he wants to defer capital gains tax. He is considering selling it to
his family corporation, which will pay him over 20 years but can sell the land for cash much sooner. The problem is to determine whether this is an effective
strategy for "deferring gain recognition on sale of the land." Observation If he proceeds in the manner he has planned, Mr. Tucker essentially
becomes a mortgage holder. It is common practice - and in most cases required - for the sale of any real property to fulfill obligations to lienholders as a
condition of the sale. In some states the practice of seeking to circumvent outright sales through the use of land contracts is specifically illegal under state law. Michigan
is one such state, but its "due on sale" clause of MCL 445.1621 et seq. applies to individuals only if they extend more than one mortgage in a calendar year.
Whether Mr. Tuckers plan would invoke any similar law depends on the state where Mr. Tuckers land is located. The bottom line is that state law may require
the Tucker Family Corporation to pay Mr. Tucker in full at the time of any future sale of the investment property that Mr. Tucker now holds. In that case
Mr. Tucker would be liable for the full amount of capital gains tax that can be applied to the appreciated property. Deferring Capital Gain
Searching Google for the phrase "defer capital gain" returns several results, most of which focus on the 1031 exchange in which the IRS allows deferment of capital gain payment
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