Infantry Regiment

At Financial Management Group, we’ve had a great deal of experience in helping our clients to avoid paying unnecessary taxes, especially in situations involving the sale of commercial properties.

For example, let’s say an investor had purchased a property through a 1031 tax-deferred exchange and carries his basis forward from the old property to avoid paying capital gains on the sale. Now the newly purchased property is having financial problems and the lender forecloses on the property. This investor will more than likely have a large tax liability because his basis is from the old property and is much less than the current mortgage. He would have better off paying the capital gains from the sale of the prior property.

Remember, of course, that when you’re hit with a large tax, you can often defer payments for five years. After that, you’d have to pay 20% of the tax liability until the debt is paid.

Another possibility if you’re facing a large tax liability is to see if you can defer it by structuring something called a tax-deferred exchange. The downside is that such deals require equity as well as debt. So if your equity is low—a common problem these days—it’d be difficult to successfully structure such a transaction.

If you’re finding yourself upside down on a commercial property, the best idea is to sit down with an experienced commercial property advisor and your tax accountant to work through all your options. The more experienced your advisors in such cases, naturally, the better off you’ll be.