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Avoiding Capital Gain Tax In Selling A Commercial Real Property

If the information above regarding 1031 deferred exchange seems to be too complicated, and it can be, the Seller may also avoid paying capital gains tax for the sale of a commercial property for years through a “Structured Sale.” The structured sale would allow the Seller to defer and delay paying capital gain tax and be able to obtain secured, steady income through a Seller Finance instrument. Please contact the experienced Houston Real Estate Commercial Transaction Attorneys and our Houston Commercial Transaction Lawyers assist you in identifying an instrument, whether it is a 1031 Deferred Exchange or a Seller Finance, which suits your need.

A structured sale occurs when the Seller finances the transaction. The Seller would take a down-payment from the Buyer and personally finance the remainder of the principal amount at a specified interest rate, which is usually from 8% - 10%. As stated in the above section, a seller-financing would benefit the Seller in a number of ways, including the ability to transfer real property to a Buyer of your choice, obtaining interest payments on the sale of the property, and delaying payment capital gains tax. The Law Offices of Steven Tuan Pham’s Houston business transaction Lawyers and Houston commercial real estate attorneys would draft a promissory note, the security instrument (a deed of trust), and a warranty deed on behalf of the Seller. At closing, the Buyer would sign the promissory note and Seller secures the note when our Houston Real Estate Transaction Attorneys file the deed of trust with the county clerk. Thus, for the life of the loan, the Seller will enjoy a steady stream of income from the finance and avoid paying capital gains tax until the principal amount paid by the Buyer exceeds the basis (the cost of the purchase price, minus depreciation value).

As stated previously, Law Offices of Steven Tuan Pham is not a tax consulting firm. However, having tax knowledge allows our attorneys to assist you in identifying and developing instruments that suit your needs. You should always consult your tax professional or CPA in addition to your attorney when structuring a business or commercial real property transaction. The Law Offices of Steven Tuan Pham’s Houston Business Transaction Attorneys and the Houston Real Estate Lawyers will assist you in business transaction drafting, negotiating a sale or purchase of a commercial property, drafting closing and financing documents, as well as assisting you in the closing process of the sale or purchase of real property. Please contact our West Houston Business Transaction Lawyers or our Northchase Real Estate Closing Attorneys to set up a consultation.


The information above is NOT intended to replace a personal consultation with our Houston Real Estate Transaction Lawyers and our Spring Houston Real Estate Litigation Attorneys. Readers should not construe the information as a consultation. There may be other legal issues based on the specific fact of each case. Every case is unique and our Houston Real Estate Transaction Attorneys and our North Houston Real Estate Litigation Lawyers need to review the facts and circumstances of each individual case in order to provide a meaningful personal consultation. Please feel free to give us a call at 713-517-6645 or complete our Contact Form.