KB CAPITAL ADVISORS Asset Backed Installment Sale Presentation 1031 - - PowerPoint PPT Presentation

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Asset Backed Installment Sale Presentation 1031 Exchange Alternatives

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23% of Real Estate Investors want To Sell… …but don’t want to use a 1031 Exchange For the Following Reasons

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Median Los Angeles property now $800,000 a 33.3% YoY Increase 249,000 Residential Income Properties Exist 247,000 Commercial Income Properties Exist At a historical 3% turn over, close to 15,000 properties will change hands, with a cumulative value of $12 Billion in 2018.

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KB Capital Advisors, LLC

01

FINRA registered Wealth Management Firm specializing in tax strategies

02

$130 Million in Assets Under Management

03

Full Spectrum Solutions with CPA, Attorney, Wealth Manager and Real Estate Brokers on staff

04

Management Team has over 70+ Years of Financial Services Experience

KB CAPITAL ADVISORS

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Executives & Team

Daniel Klein

Wealth Manager

Kevin Bonn

Real Estate Strategy Director

Jessica Monroe

• Esq. & CPA

Kimberly Wright

Esq.

, ¡

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KB CAPITAL ADVISORS 40 Year History, with Equity of $6 Billion as of Q2 2018 Interactive Brokers conducts its broker/dealer business on over 120 market destinations worldwide. In its broker dealer agency business, IBKR provides direct access ("on line") trade execution and clearing services to institutional and professional traders for a wide variety of electronically traded products including stocks, options, futures, forex, bonds, CFDs and funds worldwide. Interactive Brokers Group and its affiliates execute over 800,000 trades per day. Interactive Brokers is headquartered in Greenwich, Connecticut and has over 1,200 employees in its

• ffices in the USA, Switzerland, Canada, Hong Kong, UK, Australia, Hungary, Russia, Japan, India,

China and Estonia. IBKR is regulated by the SEC, FINRA, NYSE, FCA and other regulatory agencies around the world.

Corporate Partners

3rd Party Lenders (Collateralized Line of Credits)

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1031 Exchange Process & Problems

Sell Property Identify 3 Properties within 45 Days Close on Identified Property within 180 Days (timeline graphic) Things Things that that can & can & do go do go wrong wrong

Client Client can’t can’t finance finance the the next next leg leg Properties Properties fail fail inspection or inspection or due due diligence diligence

01 02 03 04

Federal & State Tax Tables

Capital Gains Tax

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Tax Type Income Below $250,000 Income Over $250,000

Federal Capital Gains 15% 20% State Capital Gains 0-9% 9-13.8% Depreciation Recapture 25% 25% Net Investment Income Tax 0% 3.8% Total 40-49% 57.8-62.6%

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Tax Deferral Strategies

Donate or Gift assets into an Irrevocable Trust

Pro-The Asset is legally no longer yours. Con-No control or access to Asset.

Enter into an Installment Sale

Pro-Defer Taxes over the course of the installment payments Con-Buyer may default.

1031 Exchange Until You Die

Pro-Unless estate is over $20 Million heirs get step-up in basis Con-You’re dead. KB CAPITAL ADVISORS

Why Deferral Brings You A Higher Return On Your Investment Plan

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$1 Million Sale on $600K Purchase 10 Years Ago Example

Client Client who Defers Sale Price $1,000,000 $1,000,000 Sales Commission ($70,000) ($70,000) Mortgage Payoff ($450,000) ($450,000) Net Proceeds $480,000 $480,000 Depreciation Recapture ($54,000) ($54,000) Capital Gains Fed ($60,000) ($60,000) Capital Gains State ($36,000) ($36,000) Net Net Proceeds $330,000 $480,000 TAXES PAID $150,000 Deferred

Why Deferral Brings You A Higher Return On Your Investment Plan

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$0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000

Starting Amount Year 5 Year 10 Year 15 Year 20 Year 25 Year 30

Reinvesting with Leverage

Series1 Series2 Series3

$0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000

Starting Amount Year 5 Year 10 Year 15 Year 20 Year 25 Year 30

Benefits of ABIS

Series1 Series2 Starting Amount Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Non-Deferral (5% Growth) $330,000 $421,172.92 $537,535.23 $686,046.30 $875,588.24 $1,117,497.13 $1,426,240.98 Deferral Client (5% Growth) $480,000 $612,615.15 $781,869.42 $997,885.53 $1,273,582.90 $1,625,450.37 $2,074,532.34 ABIS Reinvest Client (5% Growth, 30% Down) $480,000 $1,008,164.00 $2,117,488.84 $4,447,450.02 $9,341,164.54 $19,619,637.01 $41,207,940.92

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Current 1031 Exchange Alternatives

DST (Delaware Statutory Trusts)

Pro-1031 Exchange Eligible REIT product. High Cap Rates, Instant Diversification, Professional Management, Close in 3 days Con-Accredited Investors Only. 5-7 Year Holding Periods.

Charitable Remainder Trusts

Pro-Irrevocable Trust, Give to Charity, Huge Tax Breaks, Guaranteed Income for Life typically higher than Rents, No More tenant management Con-Access to funds restricted. No more investing. Age restricted

SCIN-Self Cancelling Installment Notes

Pro-Gift large assets to next generation for small payments today Con-Next Generation may not have capacity to purchase Installment Sales (IRS Section 453) Pro-Defer taxes up to 30 years. Con-Buyer default risk.

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You’ve Seen the Rest, Here’s the Best

Asset Backed Installment Sale (ABIS)TM

2 Years of tax and accounting research, and selling banks on idea Follows IRS Code 453 and spirit of the law Legitimate 3rd party lender and true segregation of funds

• Not a Deferred Sales Trust or Monetized Installment Sale. These firms don’t use a

3rd party lender and the funds are not segregated (Audit and Capital Risk to Sellers) KB CAPITAL ADVISORS

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Asset Backed Installment Sale

Client hires Agent and KB Capital Advisors Client sells Asset, and elects 30 year tax deferral Buyer funds escrow with cash or loan, escrow closes. KBCA, Interactive Brokers and Client sign Custody Agreement

KBCA and Client have fiduciary relationship. After 6 Months +1 Day, Client can borrow up to 90% of Custody Funds Value. If Client borrows funds, custody funds in US Treasuries. Borrowing costs 2.5%-4.75%, Interest Only, KBCA manages day to day funds, handles IRS forms, and quarterly deferred tax payments.

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ABIS Example

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Client Sells Property For $1,000,000, Defers $300,000 in Taxes. $1 Million in Custodian Account (2.86% return on Treasury +$2,383.33) Borrows $800,000 at 3.75% Annually ($82.19 per day, $2,465.75/month)

$1M

3 Business Day Closing, No Qualifying $10,000 per Year Paid to IRS for 30 years 1% AUM fee plus $2,500 per year Account Management/Tax Prep)

$1M

Book loan

ABIS Example

Client hires Agent and KB Capital Advisors Client Sells Asset, 30 yr. Deferral Buyer funds escrow with cash or loan KBCA, IB and Client sign custody agreement

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Thanks!

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