The sale of business or investment real estate assets can create a large tax liability. However, the Internal Revenue Code §1031 provides that capital gains taxes and other taxes can be deferred when business or investment assets are properly relinquished and replaced with like-kind replacement assets.

The Scenario:
Investor/client seeks the following objectives

• To relinquish existing investment property and to acquire a new property that meets the Client’s investment needs;
• To defer capital gains and depreciation recapture;
• To preserve capital and increase wealth.

• CRIC Capital professionals work with the Client to identify assets that can meet the Client’s business or investment needs. Most often, the Client can choose from among CRIC Capital pre-packaged real estate products, vastly simplifying real estate investing.
  
  
• CRIC Capital assists the Client in structuring a §1031 tax-deferred exchange that will maximize after-tax proceeds while deferring capital gains and minimizing transfer and other taxes.
  
  
• CRIC Capital’s experience in structuring and closing over $10 billion worth of real estate transactions provides the Client with a smooth, efficient §1031 exchange process.
  

The Benefits:

• Capital gain and depreciation recapture taxes that would otherwise be incurred on an outright sale of the property are deferred.
  
  
• Client can acquire substantially more valuable replacement property.
  
  
• Client retains significant cash proceeds allowing for additional investment to grow and/or diversify the investment portfolio.
  
  
• Depending upon the Client’s business or investment goals, many other positive outcomes can be structured, such as, maximization of after-tax cash flow, elimination of property management hassles, and portfolio diversification by geography, property type, and credit quality.
  

Example Sale vs. Exchange:

• Existing client asset:
  · 1 Property valued at $25 Mil
  · Tax Basis of $1.5 Mil
  · Existing debt of $18.75 Mil
  · Capital Gain Tax Rate of 22%
  (Combination of federal and state tax, plus depreciation recapture.  Some investors will be taxed at the higher corporate rate of 35%)
  
  
• §1031 Exchange replacement asset:
  · 1 Net Leased Property valued at $25 Mil
  · Existing debt of $18.75 Mil
  · Refinance capability to 92% LTV due to credit tenant lease