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Sell investment real estate now; pay the tax bill later

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in Small Business Tax,Small Business Tax Deduction Strategies

Yes, the new 15 percent top rate on capital gains is good news for real estate investors. But if you sell investment property, your actual tax bill can be much higher than 15 percent of your gains, due to earlier depreciation deductions. (Gains from prior depreciation write-offs are taxed at a 25 percent maximum federal rate.)

If you'd rather defer the tax than pay it right away, consider this unique strategy: Sell the real estate to a private annuity trust that you create. Such a trust can then sell to a buyer you've lined up while your tax bill is spread over many years. Here's how the strategy shakes out:

Problem: Fully depreciated property

Chances are, you've taken extensive depreciation deductions on your investment property. Your basis in the depreciable portion of the property may even have withered to zero if the building is fully depreciated.

When you sell the property, all those depreciation deductions ...(register to read more)

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