Execution of Tax Advantaged "Exit Strategies"

While many/most investors eventually become reasonably well educated on the benefits and strategies of owning income producing investment real estate, it is quite the opposite situation with investors who are appropriately educated on the best way to exit their real estate investment-(s). In fact, it is a rarity of investor who has developed an "end-game" strategy that plans ahead for the timely and proper disposition of assets under the most favorable circumstances.

Typically, the most common strategy has been for investors to reposition their capital (equity) by continually exchanging (1031) into larger properties. The result is that investors have brought forward their old basis to a point where depreciation and tax benefits are evaporated.

The classic strategy of tax avoidance through a stepped-up basis on death is not as effective or attractive to many of today's seniors and baby boomers that are living and staying active longer. To further complicate matters the Tax Relief Reconciliation Act of 2001 is currently scheduled to phase out the stepped-up basis by the year 2010.

The Carlson Company is uniquely qualified to assist Investors/Clients to both objectively evaluate and ultimately execute the "exit strategy" best suited for their situation and objective (cash flow, continued wealth building, access to wealth, etc.).

Some of the options that will be analyzed and considered include:

• Simply selling and paying taxes due to the historically low capital gains rate.

• Continued 1031 exchange options into more passive property types requiring less or no personal "hands-on" management.

• Gifting options to qualifying charitable organizations/entities.

• Installment and Structured Sale arrangements where the recognition of capital gains can be controlled/scheduled as desired by the exiting investor.

The Carlson Company has developed sophisticated, yet easy to understand analytical tools to compare the different options. Additionally, and equally important, we will "quarterback" the chosen strategy and insure appropriate experts in tax, legal, estate planning and structured sale compliance (see Structured Sales) are appropriately consulted in the decision-making process.