Long story short, I am selling some property and trying to avoid the big tax burden of the proceeds. I'm also leaning towards trying to move towards retirement vs buying additional investments so I'd prefer to avoid a 1031 right now. Any other options out there to avoid that? Alternatively, I would also consider just selling and gifting my kids the proceeds but I'm not sure what the tax burden on that is (not sure if it falls under the lifetime kid gift allowance). I do have a meeting coming up with an estate attorney but just looking for a head start.

Jimmy Conway said:

---

Long story short, I am selling some property and trying to avoid the big tax burden of the proceeds. I'm also leaning towards trying to move towards retirement vs buying additional investments so I'd prefer to avoid a 1031 right now. Any other options out there to avoid that? Alternatively, I would also consider just selling and gifting my kids the proceeds but I'm not sure what the tax burden on that is (not sure if it falls under the lifetime kid gift allowance). I do have a meeting coming up with an estate attorney but just looking for a head start.

---

Not sure what kind of property you're selling but the lifetime gift tax exclusion is extremely high (like $15mil per individual).

I guess it depends on if you need the proceeds or not to fund your retirement. Your kids would get a step up in basis if they inherited it from you later.

There are ways to offset the tax but hard to give advice without knowing dollar amounts

I think the gift threshold is like $13m

Orlando Ayala Cant Read said:

---

I think the gift threshold is like $13m

---

Check the updated 2026 numbers. Also trumps bill got rid of the sunset

Simplest solution: Take the tax hit now, gift what you want to gift and be done with it. Something to be said about just keeping it simple.

You could 1031 a portion of it and then hold that asset until your death, leave it to the kids and they will get a stepped up basis. This will require more paperwork for everyone to deal with now and later, but can save some money if that is your priority.

Jimmy Conway said:

---

Long story short, I am selling some property and trying to avoid the big tax burden of the proceeds. I'm also leaning towards trying to move towards retirement vs buying additional investments so I'd prefer to avoid a 1031 right now. Any other options out there to avoid that? Alternatively, I would also consider just selling and gifting my kids the proceeds but I'm not sure what the tax burden on that is (not sure if it falls under the lifetime kid gift allowance). I do have a meeting coming up with an estate attorney but just looking for a head start.

---

Yes, 1031 to 721 Upreit. As long as the funds from the sale go directly to a qualified intermediary, this would be an option. You would be a limited partner in professionally managed commercial property and collect your portion of the income. If you hold to your death, your beneficiaries would get a step up in basis.

Baby Billy said:

---

Jimmy Conway said:

---

Long story short, I am selling some property and trying to avoid the big tax burden of the proceeds. I'm also leaning towards trying to move towards retirement vs buying additional investments so I'd prefer to avoid a 1031 right now. Any other options out there to avoid that? Alternatively, I would also consider just selling and gifting my kids the proceeds but I'm not sure what the tax burden on that is (not sure if it falls under the lifetime kid gift allowance). I do have a meeting coming up with an estate attorney but just looking for a head start.

---

Not sure what kind of property you're selling but the lifetime gift tax exclusion is extremely high (like $15mil per individual).

I guess it depends on if you need the proceeds or not to fund your retirement. Your kids would get a step up in basis if they inherited it from you later.

There are ways to offset the tax but hard to give advice without knowing dollar amounts

---

The property is multifamily. Purchase price was $720k in 2002, sale price now is $1,600,000, It is free and clear of a mortgage for now but I do have a credit line against it which is 0 right now, but might be around $150k by the time of closing (it would then be collateralized , but I'm not sure it makes a difference in this scenario?) . Thanks to everyone for the help.

I'll give you a clean, U.S.-focused overview so you have a solid framework going into your estate attorney meeting. This is general education, not individualized tax advicebut it should help you ask the right questions.



First: a key reality check

If you sell appreciated property, capital gains tax is usually unavoidable unless you:
defer it (timing strategies), or
offset it (exclusions, losses, charitable planning), or
eliminate it (step-up at death)

A 1031 exchange is only one deferral toolnot the only planning lever.



Option 1: Sell and pay the tax (but possibly reduce it)

Before looking at complex structures, confirm whether any of these apply:

A. Primary residence exclusion (if applicable)

If this is/was your primary home:
$250,000 gain excluded (single)
$500,000 excluded (married filing jointly)
Must meet the 2-of-5-year ownership and use test

This does not apply to pure investment property.



B. Capital gains + surtax reality

For investment real estate:
Long-term capital gains: 15% or 20% federal
Net Investment Income Tax: +3.8%
Plus state tax, if applicable

Your CPA can model whether you're closer to ~19% or ~30% all-in.



Option 2: Installment sale (often overlooked)

Instead of selling all at once:
You receive payments over time
Capital gains are recognized gradually
May keep you in a lower tax bracket
Helpful if you're transitioning toward retirement income

You still pay the taxbut later and potentially at lower rates.

Ask your attorney/CPA:

"Can an installment sale meaningfully smooth or reduce my tax burden?"



Option 3: Opportunity Zone (non-1031 deferral)

This can still work in limited situations:
Capital gains can be deferred until the end of 2026
Must reinvest gains into a Qualified Opportunity Fund within 180 days
The original gain is still taxable in 2026
Future appreciation inside the QOF may be tax-free if held long enough

This is complex and risk-dependent, but it does avoid 1031.



Option 4: Charitable planning (powerful if you're inclined)

Charitable Remainder Trust (CRT)
You sell the property inside the trust
No immediate capital gains tax
You receive income for life (or a term)
Remainder goes to charity
Often paired with life insurance to "replace" value for kids

This is highly effective for:
Large gains
Retirement income planning
Reducing taxes without reinvesting in real estate

But it's not reversible and has legal/admin costs.



Option 5: Sell and gift the proceeds to your kids

This is where many people get tripped uphere's the clean answer:

A. Capital gains come first
You pay capital gains tax when you sell
Gifting afterward does not erase that tax

B. Gift tax rules (federal)
Annual exclusion: ~$1819k per child per year (changes periodically)
Anything above that uses your lifetime exemption
Lifetime exemption is currently very high ($1314M per person)
Scheduled to drop roughly in half after 2025 unless Congress acts

Most people:
Owe no gift tax
Just file a gift tax return (Form 709) to track the exemption

So yesgifting generally falls under the lifetime allowance, not an immediate tax bill.



Option 6 (often best for families): Don't sell

If your long-term plan is wealth transfer:
Property held until death gets a full step-up in basis
Capital gains tax is effectively eliminated
Heirs can sell shortly after with little/no tax

This is often the lowest-tax outcome, but it doesn't provide liquidity now.



How this usually gets optimized

Many people combine strategies, for example:
Partial sale + installment
Sale + CRT
Sell, pay tax, gift strategically over time
Hold until death for step-up

There is no single "magic" solutionjust tradeoffs between:
taxes, liquidity, control, and simplicity.



Smart questions to bring to your estate attorney
1. "What strategies reduce capital gains without a 1031?"
2. "Would an installment sale materially help my tax picture?"
3. "Does a CRT make sense given my retirement goals?"
4. "How does the 2026 estate tax exemption sunset affect gifting now?"
5. "Should I be coordinating this with a CPA before closing?"

In the event you end up doing some combo of a 1031 and something else.

Luann Blough
luann@erg1031.com
214-995-5488

Jimmy,

I'm not sure how much money you're talking about (nor is it any of my business, of course), but to build on the 'Option 2' Installment Sale suggestion that mpestes mentioned, I might add a variance that I've been considering for some property I'll be selling down the road.

By spreading out gain over a number of years, you can sometimes avoid the 3.8% Net Investment Income Tax that will add to your capital gains tax rate. And, many times, you can lower your capital gains tax rate by having lower annual income overall.

The problem I've always had with installments sales is that I don't really trust the purchaser to pay his note, and I damn sure don't want the property back.

So, insurance companies have come up with something called the 'Structured Installment Sale' where they basically are the surety for the note. Now, if the insurance company goes south, I guess you're screwed, but otherwise, it might work for you.

Again, I don't know your particulars. FWIW, I think Metlife does these.

Regardless, good luck.