The Challenge

Real estate continues to be one of the best ways to build wealth. However, the opportunities and challenges facing the real estate industry require experienced advisors with a significant level of first-hand knowledge. That’s where we found ourselves with a Denver family whose property was purchased via eminent domain by the city to build a mixed-use park. This multi-million-dollar buy out was going to cost this family hundreds of thousands in taxes until the Morgan Rosel team stepped into our real estate consulting shoes to develop and manage a strategy.

Our Solution

Our advisors recognized the situation and advised the client to utilize a unique structure within the tax code called a 1033 Exchange. This type of exchange is like the more traditionally performed 1031, but if implemented correctly, it allows for the seller to keep a substantial amount of the cash proceeds in addition to deferring taxation. This opportunity is only available when a taxpayer’s property is reclaimed via eminent domain, condemned, or disposed of under threat of condemnation by the government.

The Result

Understanding and utilizing a 1033 Exchange allowed our client to retain the majority of the cash he received from the sale of his property, yet defer over $700,000 of capital gains tax that would have been due from this sale. Our solution also made it so that our client’s heirs will receive the totality of the sale while paying nothing in capital gains, assuming he holds this investment the remainder of his life.

Although this type of an exchange can only be utilized in very specific instances, our advisors are intimately familiar with, and have personally performed, dozens of real estate transactions. We believe this depth of experience adds substantial value with all of our clients during the advisory process.

Nothing in the above case study should be construed to be specific investment or tax advice.

This commentary reflects the personal opinions, viewpoints and analyses of the MorganRosel Wealth Management, LLC (“MRWM”) employees and guests providing such comments, and should not be regarded as a description of advisory services provided by MRWM or performance returns of any MRWM Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. MRWM manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. MRWM may recommend the services of a third-party attorney, accountant, tax professional, insurance agent, or other specialist to clients. MRWM is not compensated for these referrals.