Using a 1031 Exchange Tax Strategy

All right. Hi, Yolanda. How are you, dear?

Hi. How are you?

Good. And is your man with you?

Yes, Jorge's there. I don't know if he is following

the things to click there or not.

Another one you want to bring up?

Yep, let me send him the panelist invite. So, Jorge,

I got you right there. Let's go ahead and get you in here. I

think it looks like he is now in the waiting room. So, let me go

ahead and send him an ask to unmute, and then ask to start a

video. There we go. All right, perfect. We are good to go.

Okay, very

good. All right. Hey Jorge, how are you?

I'm good, thank you. Can you hear me?

Yes. Where do you guys live in New Jersey?

Fairfield, Fairfield, New Jersey.

Okay, and you are talking to Jordan. The

I'm selling a commercial building and liquor

license for 900k, and plan to use the proceeds to pay off 300.

Oh no, no, no, no, no! That already is a bad plan. I'll tell

you why in a second, because you want to pay off 390,000 in

personal debt. Your goal is to under to understand total

capital gains exposure and reduce tax liability to under

100k if possible. How will the gains be calculated and

allocated given the ownership changes, and how will the liquor

license portion be taxed? You need our tax teams number one.

So this is a calculation that they have in either their their

accounting, their tax software, so it can be done that

precisely, and/or it can be put through some M and A merger and

acquisition. So typically, you the real estate and the license

would be would be sold separately. So is there a reason

why? I mean, do you have an offer for 900 to put it

together?

The attorney did is did one contract, but amended saying

150 for the liquor license and 750 for the building. The

reason being is because when we got it, we got it same way.

I'm sorry, you broke up. No, can you hear me

better now? Yeah. Yep. Yep. Yep. So you you did you bought them

together? Was it in one entity or they two different entities?

Is it an LLC? What is it?

Yes, the legal license is under the LLC, and they are

building us is under my daughter's and my name.

Oh, so it's personal.

Yes.

Okay. So I mean, here's just some ideas.

Well, first, first, I got to handle the debt question. So,

first of all, how do you get in in 390,000 in personal debt?

How's that personal? That's no,

no. I think it's misunderstanding. I own and a

mortgage for 220. That's why I own the building, 220 in a

mortgage. I took $170,000 an equity second mortgage from my

primary residence to do some repairs, some you know items

that I needed to do, and I spent the 190, but 170. But I took

that second mortgage in my primary residence, not in that

building.

Okay, but so again, like if if I was selling

it, I would do a different transaction. I would take the

gains that you can minus the mortgage, and I would 1031 it.

So now you move right into the property, and that is how you

wipe. That's how that is your number one way to alleviate the

taxes. So then you're paying. So again, your tax guy is not, or

your lawyer is not a tax guy. Clearly, if he's doing one

transaction, I would do two transactions. I would separate

them. I would 1031 into another real estate project that

actually can cash flow, and then we will work on how the LLC has

done deductions, so for you, I'd send you straight to the like I

already know the guy who actually formulate an exact tax

plan for you. So then you're only paying on the liquor

license for any capital gains, and because it's liquor license,

there's all sorts of other tax laws around that that can reduce

that. So I don't think you're going to pay 100 in tax. I mean,

unless you really just want that money, I would move it to

another piece of property, and then if you have a any debt

left, then use some of our different funding sources and

like we'll transfer it to 0% Then you can breathe. Now you

have 0% money. Who cares if it's a debt that's free, and then

recalculate. How do you want to go make money again? Right. So

are you? Yeah. What's your either new business going to be,

the new commercial property, or whatever you want to turn 31

into? I wouldn't pay it. But if you absolutely want to sell it

all, then I would go to our again our tax guy. If you only

had this in one LLC in your personal name, you are you

within selling. Just like this year, next year, like right now.

I'm selling it right now. Like maybe in is already in

the contract, so maybe another two, three months.

I would extend and get our team, our tax teams.

I mean, it's up to you. You're either going to pay us or pay.

You're going to overpay tax because I prefer

pay you guys so you can. Well,

and and then we can. We have a whole lifetime

strategy. I mean, right? We're not going anywhere. I'm not

going anywhere. We've got huge team around us. I would separate

the transaction, and I would get to our our tax guy. And I mean,

seriously, why not 1031? Has anybody brought that up with you

guys? That's.

I had a friend that told me about that, but we

didn't. I don't know anything because I go and give my w2 to

my accountant and tell her what I make and what I paid, and

that's it. I don't ask much. No.

Well, I know, but that's part of you. If

you've heard some of my social media, I say you know most CPAs

are historians. They're just documenting what you've done.

They're not in front of you, leading you, saying this is what

we're going to do. So, given the money you make, given how you

invest, this is how we're going to very prescriptively move that

tax burden way, way down. And you have in this because of

commercial real estate, you got cost segregation that could go

against this. You got double. You got bonus depreciation.

There are so many tax plays on the building separately that I

would play different than the license. And then, do you have

any other entities between you two? Is the one LLC the only

thing you got? We have

another LLC. We need. We have another LLC for almost

10 years.

Perfect. Okay. So then we're going to use that.

So they'll use that to help offset on that liquor license on

how to reduce your taxes, for sure you'll get under 100 if you

just did those few things. I mean, it would be shocking if

the if the liquor license is only 150, and we can use the

other we can do use both companies, then we can have some

strategy to reduce. And then I would just since it's already in

your personal names, just 1031 out of that thing.

Okay, perfect. So I would think

we want to extend this enough to make sure

because you have 45 days to find new property, and part of what

you also learn and can look at at the big table is you know we

have other you know we have 1000s of big table members all

over this country who may have a better option because New

Jersey, as you know, is way different tax. I mean, you know,

I can introduce you to some folks in Ohio, Indiana, Idaho,

Kansas. That's where I buy a ton of my commercial property. You

know, I mean, maybe what you have left from that once you pay

off the mortgage, you could go into a fourplex, eightplex, you

know, sixteenplex, you know. See what I'm going like. We'll help

introduce you to people, so you're going to get the most

return and a better asset, a better cash flow asset than if

you did it in Jersey. You're not going to buy as much in Jersey

as you can buy in Kansas.

Kansas, okay. For one question, that you're saying

that I'm putting everything under 3131 law. I have my son

that is purchasing a residential home with a renovation loan.

He's paying 350 with a renovation of 110, so it's 460.

He's gonna close the beginning of next month. He's gonna buy. I

think he's gonna put it under his LLC later. Can I? Because my

closing is not gonna happen tomorrow. It's gonna happen

maybe in June, July. I'm not gonna rush to sell. Can I when

he owns the property, he's a family member, my son. Can I

purchase the building for the new price with the money that

I'm that I'm gonna put it under the 3131, like 1031.

You mean?

Yes.

Your son purchase the building for you

from the 1031. Yes.

No, he's gonna purchase like he's gonna close the

beginning of next month on what the

residential house or the

building a residential house.

So that has

nothing to

do with this,

right? No,

had nothing to do. But I can. I when he closed his purchase with

the money that I gonna gain from the sale of the building from

the 900. Can I not gonna

gain? You're not gonna gain. You're gonna

move it all. All all the net profits. So if you you have 900

minus the mortgage, whatever that balance is, that whole

thing has to move to a new 1031 exchange property.

All at one, right?

Perfect. Only one. But

you can, but you can add his name to the the

new purchase, and then and then I would move the new purchase

into and our teams will help you. We'll move that into an

LLC. We'll quick claim it. So say you close it, pay off the

mortgage, whatever the balance is. Say whatever that math

equation is. Call that six something, 600 something. All of

that would move. Say to like use an example apartment in Kansas.

Then once that's quit claimed into an LLC in Kansas, like I

mean your family could own it. Your son could join then and own

that you know as well.

Okay, perfect. That's that's a question. And one last

question. And what do I want to say? Oh my God, I'm so excited

and I'm speaking to you that I forgot about my question. Oh,

remember at the beginning I say that I took a first mortgage in

my primary residence for 170 to build that to be part of the

900,000, can I pay as a mortgage? Because no,

no, and because you're trying to

collapse a home residential mortgage with a commercial

property. I mean, we'll ask the 1031 team, but I don't think so.

I'm pretty sure that's not going to be, and I don't think you

want to. I think it feels like you're trying to consolidate,

but you're not. Yeah, yeah, but you're not consolidating. It's

not apples and apples. You're trying to you know make a

watermelon and apple. Like you, they're not in the same asset

class.

Okay, that building is not considered is is is finance

residential because it's

a mixed use, but it is considered 100% residential.

It's not a commercial. It's not a commercial. It's the buyers

are buying us as a residential too.

Okay. So again, it's math equation for

the tax team. So I wouldn't even guess. But again, I don't want

you debt free. I'm not Dave Ramsey. I'm not Susie. As long

as your primary residence is like got a lower interest, why

would you spend that kind of money when you can use the base

of your money, use the core principle to make more money?

And it's okay you carry debt. I mean, as long as the debt's not

crazy, you know, like 1012, you know, 20% and you're you know

right now most mortgages are in the five six range. So as long

as you're still below that, I wouldn't pay it off. Still good

money. You're not going to find that again.

Correct, correct. Totally, totally agree with you.

Yes, you

got it. Yeah, it takes too much to make that

kind of principal back. Now, when are you and Jordan talking

again? Because we are having a big table Monday, Tuesday here

in Reno.

Okay, I I was trying to get tickets and everything

coordinated with my work. Just call in

sick. Just call in sick. You're fine.

The thing is that I'm going on vacation and I'm taking

like a two weeks off. No,

you're going to go on business trips. See, we

got so much to fix with you. We have so much to fix with you in

that pretty little head. So go consume my YouTube channel,

Winnie and Jordan talking. You can make this happen.

After the call, I think after the meeting, we're gonna.

She said she was gonna give us a call.

Yes, perfect,

awesome. Well, it's great to great to meet you

guys. Look forward to helping. And I love that you're in the

game, but you're still in the bleacher seats, trying to sort

out how to put this together. This is this is your Rubik's

cube. You got a lot of like moving parts, and they don't fit

together very well. So it's funny joke because this is how

most people look. I have to learn how to put this thing back

together. I had to give it to my son. I don't know how to do it.

Thank God this isn't money. All right, you guys. I got to keep

moving. Great to meet you.

Thank you very much. Same here.

Thanks for listening to the Real Money Talks podcast. For some

special wealth building gifts, only for Laurel's podcast

listeners, visit askloral.com/podcast. Do you

have a burning question for Laurel? Visit askloral.com to

submit your question, and it just may be covered on a future

podcast episode. Until next time.