This article illustrates the sale of a highly appreciated $10 million ranch. It will examine how the use of proven wealth preservation strategies will allow a family to:
- Decrease taxes paid on the sale
- Increase annual income for retirement
- Increase wealth passed to heirs
- Increase money left to charitable organizations
The advanced planning strategies include:
- IRC Section 1031 Tax-Deferred Exchange
- IRC Section 664 Charitable Remainder Trust
- IRC Section 121 Personal Residence Exclusion
- Irrevocable Life Insurance Trust
Four sale scenarios are illustrated:
- Option 1: Cash sale of the entire $10 million ranch
- Option 2: Cash sale for $6.5 million and 1031 Exchange for $3.5 million
- Option 3: Cash sale for $3 million, 1031 Exchange for $3.5 million and Charitable Remainder Trust for $3.5 million
- Option 4: Cash sale for $3 million, 1031 Exchange for $3.5 million, Charitable Remainder Trust for $3.5 million and purchase of a $3.5 million Second-To-Die Life Insurance Policy in an Irrevocable Life Insurance Trust
Below is a summary of each of the four options.
| 2015 Case Study Summary | |||||
| Cash Sale | 1031 Exchange & Cash Sale | 1031, CRT & Cash Sale | 1031, CRT, ILIT & Cash Sale | ||
| Federal and State Income Tax Liability |
$2,284,600 | $1,535,110 | $488,571 | $488,571 | |
| Annual Income from Reinvestment |
$540,078 | $592,542 | $665,800 | $570,800 | |
| To Charity Upon Second Death |
$0 | $0 | $3,000,000 | $3,000,000 | |
| Net Estate Passed to Heirs | $12,208,987 | $14,976,623 | $14,794,671 | $16,971,887 | |
CLICK HERE TO DOWNLOAD ENTIRE FARM/RANCH SALE PLANNING WEALTH GUIDE
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