For owners of properties in foreclosure, the greatest problem they face is often not the loss of the property, but the tax generated. The discharge of debt on foreclosed property above and beyond the owner’s basis in the property is considered capital gain since a foreclosure is deemed by the IRS to be a sale.

The Advisory Group at Net Lease Capital works closely with the taxpayer and its tax advisors (counsel or accountants) to save as much as 60-80% of this tax burden. Structuring the potential foreclosure as a sale and 1031 exchange with investment grade net lease property can cost as little as an 8% equity investment, versus paying out tax of 15-40% on the gain depending on the taxpayer type and on state and local tax rates.

The taxpayer ends with a quality passive investment in property occupied by an investment grade corporate tenant on a long-term, absolute triple net lease – rather than paying double or more to the IRS. Additional structures are available to further enhance the outcomes for taxpayers faced with losing property.

Integrated transactions from the Advisory Group incorporate highly leveraged net lease property and structured debt to help the tax payer manage passive income and defer capital gains indefinitely, or with proper estate planning, eliminate its recognition entirely. Have your tax counsel or accountant speak to a member of our Advisory Group.