Support for the Property-owner Tired from Landlord Headaches

 

Owners of rental property...

  • will always do well with their investments by adhering to the principle of keeping their expenses below the level of their income. This process is sometimes enhanced when the owner is able to handle the majority of his own upkeep expenses. At the same time, he is still able to depreciate the basis of his property while the value of the property is, in all likelihood, appreciating.

  • ´On the other hand, once the property has been fully depreciated, a major financial benefit for keeping this property is gone. Unfortunately, this often seems to take place at a time when the owner, having undergone his own aging process, has grown weary if not less and less capable of personally handling his property upkeep. To put it succinctly, there comes a time when property management, along with property ownership, becomes more of a headache. Nevertheless, what can one do? To sell it means a wipe out by capital gains taxes and to exchange it merely continues the headache. Is there any other option?

  • YES, there is. Using the charity of your choice as a tax sheltering vehicle, a complete bypass of capital gains tax can be obtained upon the liquidation of your property, and then provide you with a lifetime of what usually turns out to be increased income. With portions of the increased earnings, provisions can be made to pass the asset value to your heirs estate tax and gift tax free. Then upon your passing, what remains passes on to your charity of choice.

How a Capital Gains Bypass Performed for the Andrews

  • Andy and Angie Andrews: both age 74

  • Life expectancy: 21.1 years

  • Value of Rental Property: $500,000

  • Property Basis:  $150,000

Sale Versus Gift Comparison

Sale of Rental Property

Charitable Gift Annuity

Gain of Capital

Capital Gains Tax

Net After Tax Value

Annual Income (at 4.9%)

Income tax Deduction

Income Tax Savings

$350,000

$83,300

$416,700

$20,418

$0

$0

$350,000

$0

$500,000

$24,500

$193,417

$76,593

Gain of Capital

Capital Gains Tax

Net After Tax Value

Annual Income (at 4.9%)

Income tax Deduction

Income Tax Savings

Capital Gain Bypass Trust

Andy Andrews - Age 74  Angie Andrews - Age 74
Annual Income of $ 24,500

 

Property

Transferred

$500,000

Fixed Lifetime Income

4.90%

Future Gift

$500,000

(Approximate Value)

  1. Appreciated property transferred to a Gift Annuity with a bases of $150,000 will bypass  tax on $350,000, plus receive an income tax deduction of $193,417 with cash savings of up to $76,593.

2. Annuity payout of $24,500

    distributed for two lives. Tax free

    payout of $5,358.78. Based on all

    the tax benefits, an effective rate

    of 7.39%.

3. After quarterly payments

    for two lives, property passes to

    the church with no probate fees

    and with no estate tax.

Sale Versus Gift Comparison

Tax Savings to Grow

Church Finances

CLERGY TAX RELIEF

GBRYANT@CLERGYTAXRELIEF.COM

PHONE:   (913) 620-5535
FAX:        (816) 673-7701

7812 N. PROSPECT AVENUE
KANSAS CITY, MO 64119