​CAPITAL GAIN TAX MITIGATION SERVICES

At Private Client Advisers, we offer a number of capital gains tax mitigation services to accommodate all of our diversified client's needs. With every transaction there is a tax concern that will be due upon constructive receipt of the sale. This will always affect the final sales price. We employ strategies that help mitigate the capital gain tax, income tax and a combination of both depending on the sale itself and the overall result our client is looking to achieve. 

​We have found that there is never one solution that fits all. Every strategy has its advantages and limitations. We often use multiple strategies to create the framework of how every transaction is executed. We tailor make a strategy that fits the client's overall goals for the sale of a capital asset. 

Types Of Tax Mitigation Strategies:

Tax Deferred Installment Sale: We work with owners of capital assets to help create the most favorable selling environment in concern to capital gains tax, income tax or a combination of both. One strategy that offers the most promising, but basic results is a Tax Deferred Installment Sale. Our capital gains tax mitigation service strategy does not eliminate the tax but rather delays the date the tax is due (for up to 30 years) while still allowing some or all of the proceeds of a sale to be paid to the seller of an asset at the time of closing. We tailor this strategy to fit the needs of all our different clients and the assets they are selling.  

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Opportunity Zone Funds: 

​An Opportunity Zone is a designation created by the Tax Cuts and Jobs Act of 2017 allowing for certain investments in lower income areas to have tax advantages. The purpose of this program is to put capital to work that would otherwise be locked up due to the asset holder's unwillingness to trigger a capital gains tax.  States may designate up to 25% of low-income census tracts as Opportunity Zones. The first Opportunity Zones were designated in April 2018.  There are more than 8,764 zones in the 50 states, and five U.S. possessions, including American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the Virgin Islands.
 
Under the new tax incentive program, an investor sells an asset and generates a capital gain. The capital gains from that investment must be reinvested within 180 days into a designated Opportunity Zone (OZ). An OZ is a specially designated census tract. Large parts of the U.S. are eligible for designation, including many commercial, industrial and residential areas.
If the investment is held, the capital gains liability on the original investment will be reduced by 10% after five years and by 15% after seven years. After 10 years, the new capital gains taxes generated from the opportunity fund investment are reduced to zero.

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Enhanced Opportunity Fund:

An Enhanced Opportunity Fund (EOF) Is a concept Comparable to a Qualified Opportunity Zone (QOZ), however the EOF concept provides substantial tax benefits, flexibility, and customization over a QOZ. With an Enhanced Opportunity Fund you can invest tax deferred monies, grow that monies in a tax free environment and consume the monies tax free. With a EOF you can invest in ANY asset and no tax is due from ordinary or capital gain income. An EOF allows you to work with a financial adviser to design an investment portfolio that meets your risk tolerance and with the help of you Financial Advisor you will be able to adjust your investment goals on an ongoing basis. This strategy also fulfills asset protection needs and ​prevents any creditor, even governments, from gaining access to the assets you hold in an EOF without your approval and at your direction.

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​1031 Exchange: 

​Under Section 1031 of the United States Internal Revenue Code (26 U.S.C. § 1031), a taxpayer may defer recognition of capital gains and related federal income tax liability on the exchange of certain types of property, a process known as a 1031 exchange. In 1979, this treatment was expanded by the courts to include non-simultaneous sale and purchase of real estate, a process sometimes called a Starker exchange.Before 2018, a wide array of property was covered by the deferment provisions of Section 1031. The Tax Cuts and Jobs Act of 2017 repealed Section 1031 for all types of property except real property. ​To qualify for Section 1031 of the Internal Revenue Code, the properties exchanged must be held for productive use in a trade or business, or for investment. Prior to 2018, stocks, bonds, and other properties were listed as expressly excluded by Section 1031 of the Internal Revenue Code, although securitized properties were not excluded. Today, only real property is included under Section 1031. The properties exchanged must be of "like kind", i.e., of the same nature or character, even if they differ in grade or quality (such as one commercial apartment to another). Personal properties of a like class were like-kind properties under the pre-2018 provisions. Personal property used predominantly in the United States and personal property used predominantly elsewhere were not like-kind properties. Cash to equalize a transaction cannot be deferred under Code Section 1031 because cash is not of like kind. This cash is called "boot" and the gain, to the extent of the receipt of this cash, taxed at a normal capital gains rate. To elect the 1031 recognition, a taxpayer must identify the property for exchange before closing, identify the replacement property within 45 days of closing, and acquire the replacement property within 180 days of closing. A Qualified Intermediary must also be used to facilitate the transaction, by holding all the profits from the sale, and then disbursing those monies at the closing, or sometimes for fees associated with acquiring the new property.

To learn more about our capital gains tax mitigation service process, contact our team today. 

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