Japanese investors can look forward to eliminating at least one major problem they face--the staggering income taxes due from the sale of their property. These taxes may be due even when property is sold at a loss. A new transaction structure developed by AES can entirely eliminate a seller's state income tax liabilities resulting from a US real estate sales transaction. Using the new strategy, sellers are relieved of both federal and state tax liabilities without having to use any of their operating loss carry-forwards. This preserves future operating profits from taxation.
Federal and most state's governments tax a seller when a US property is sold. Typical combined federal and state taxes are 40% of the total of actual profit, recapture of depreciation, and so-called phantom income, less any net operating loss carried forward from prior years. The taxes due are enormous, even when the property is sold at a loss. For example, the seller of a property purchased for $100 million and sold for $75 million with forgiveness of the $25 million deficiency is faced with US taxes of $15,400,000!
The amount of tax savings depends on several factors and must be examined on a case-by-case basis. An AES expert analysis of the potential savings is performed at no charge. AES's fee for structuring a transaction to take advantage of the opportunity is modest and paid through the close of escrow for the transaction. All engagements are subject to AES general standards.
