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Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 54018
Experience:  29 years of experience as a tax, real estate, and business attorney.
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I have commercial real estate to sell . There is no mortgage

Customer Question

I have commercial real estate to sell . There is no mortgage , I have offered the tenant a contract for 100,000 down , with 650,000 balance payable over 15 years at 4.25 percent interest. I did this to lower my taxes . I'm 70 years old .
My financial advisor says I should get all the money at once and give to him to invest in annuities . But I think my taxes on the sale would be over 200,000 . I'm not sure he is giving me the best advise
Submitted: 8 months ago.
Category: Tax
Expert:  Richard replied 8 months ago.
Good morning Ron. My name is ***** ***** I look forward to helping you. The PA tax rate on capital gains is 3.1% of the gain. At the Federal level, the tax laws concerning taxation of long term capital gains are as follows:0% applies to long-term gains and dividend income if a person is in the 10% and 15% tax brackets,15% applies to long-term gains and dividend income if a person is in the 25%, 28%, 33%, or 35% tax brackets, and20% applies to long-term gains and dividend income if a person is in the 39.6% tax bracket.In addition, starting in 2013, capital gain income became subject to an additional 3.8% Medicare tax for taxpayers with income at or above a certain threshold. This 3.8% Medicare surtax applies to taxpayers with “net investment income” in excess of threshold income amounts of $200,000 for single filers and $250,000 for married couples filing jointly. If you get paid out over time, then you can report on the installment basis and pay tax over time. But, you do take the risk of the property declining in value and your buyer defaulting. If that were to happen, although you could foreclose on the property, you may not recover your entire sale price. But, a 4.25% interest rate is likely higher than you can earn on your money with similar risk. I do believe your financial advisor has a conflict of interest because he's going to be making a big commission on the sale of the annuities. A conflict of interest is a situation in which a person or organization is involved in multiple interests, one of which COULD POSSIBLY corrupt the motivation of the individual or organization. The presence of a conflict of interest is INDEPENDENT of the ACTUAL occurrence of impropriety. Rather, a conflict of interest is a set of circumstances that CREATES A RISK that professional judgment or actions regarding a one interest COULD BE UNDULY INFLUENCED by a second interest. This is clearly the situation in your case.

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