Illustrative Fiction Only. The story, people, and numbers below are 100% fictional and provided solely to demonstrate concepts. This is not tax, legal, or investment advice. Consult your own advisors.
The Setup: A Decade of Work, One Big Decision
In 2013, “Jordan” bought a suburban mid-rise office building: 145,000 sq ft, strong medical and professional tenancy, in a growing Sun Belt market.
- Purchase price: $9,250,000
- Equity in: $3,000,000 (rest financed)
- Average NOI (last 3 years): ~$1,050,000
- Cumulative depreciation claimed: $2,700,000
- 2025 offer on the table: $18,600,000 (all-cash, 60-day close)
Jordan’s first pass with a conventional, post-LOI tax estimate produced a gut-punch.
The “Just Sell It” Math (Conventional Close)
- Contract price: 18,600,000
- Estimated selling costs (2.5%): (465,000)
- Debt payoff: (7,850,000)
- Pre-tax equity at close: 10,285,000
Now the taxes (rough, illustrative):
- Long-term capital gain on appreciation: $6,650,000
- Depreciation recapture (Sec. 1250): $2,700,000
- NIIT (3.8%) on investment income portions: included below
- State income tax: modelled at 5.0% on taxable amounts
Estimated total taxes due in year of sale: $5,480,000
Cash left after taxes in year of sale: $4,805,000
After more than a decade, Jordan would walk away with ~$4.8M cash—even though the headline sale price was $18.6M. For a hard-charging owner who lived through tenant churn and COVID-era uncertainty, that felt… off.
What was missing: a plan that prioritized liquidity, flexibility, and tax efficiency before signing the LOI. That’s the Wealthrive lens. Wealthrive
The Wealthrive Lens: What If You Could Control Timing?
When clients arrive with a big win in sight, we ask three questions:
- What do you want life to look like right after closing? (Cash needs, risk tolerance, time freedom)
- Where should your next dollar live? (Concentration vs. diversification, yield vs. growth)
- How can we align the tax timing with the life timing? (So your capital works, not waits)
For Jordan, we sketched a structure (again: fictional and illustrative):
The Game Plan (Illustrative Structure)
- Pre-Close Entity Cleanup: Shift from single-member LLC to a manager-managed partnership LLC to improve flexibility of allocations and future distributions.
- Sale Through a Compliant Deferral Vehicle: Execute the sale via a properly established third-party installment structure (think: trust or note strategy designed by independent counsel), prior to closing, so proceeds convert to a long-term payment stream rather than a lump-sum taxable event.
- Debt Handling to Avoid “Debt-Over-Basis” Shock: Pay off the $7.85M loan at close within the structure to prevent phantom gain.
- Reinvestment Policy at Close: Allocate an initial $6,100,000 to a diversified mix—laddered private credit, core fixed income, and passive real estate—with a 10-year liquidity and income plan.
- Two-Year Timing Window: Stagger principal payments to match Jordan’s lifestyle cash needs and market opportunities, not the tax calendar.
Again, this is fictional and for education only—the actual tools, documents, compliance steps, and feasibility are highly fact-specific and require qualified tax and legal advisors.
Modeled Outcomes (Apples-to-Apples, Fictional)
Scenario A — Conventional Close (All Tax Up Front)
- Cash at close (after debt & costs, before tax): 10,285,000
- Taxes paid in year of sale: (5,480,000)
- Net cash retained in year 1: 4,805,000
- 10-yr after-tax portfolio value (assume 6.0% gross, 22% tax drag): $7,705,000
Scenario B — Staggered/Deferred Sale with Reinvestment Plan
- Cash available for immediate reinvestment: 6,100,000
- Year-1 tax due: $0 (tax is deferred and recognized over the installment schedule)
- Modeled 10-yr portfolio value on reinvested capital (6.0% gross; ~10% effective tax drag due to placement): $10,845,000
- Cumulative taxes paid over 10 yrs on recognized amounts: ($3,950,000) (NPV lower due to deferral)
- 10-yr net advantage vs. Scenario A: ≈ $3,140,000
The point isn’t the exact dollar—it’s the direction: shifting tax from “now” to “later,” while reinvesting earlier, can increase optionality and lower the present value of taxes. That’s the Wealthrive mindset on display. Wealthrive
Why This Works (Conceptually)
- Time Value of Money: Paying tax later leaves more working capital today.
- Portfolio Placement: Income tilted toward vehicles with better tax characteristics can reduce ongoing drag.
- Volatility Management: Liquidity buys the right to wait for better entries, not chase deals to meet a 1031 clock.
- Life-Aligned Cash Flows: Tax recognition can be paced to lifestyle, charitable intent, or future step-up planning.
The Pitfalls We Plan Around (Illustrative)
- Documentation & Independence: Any deferral or installment approach requires strict third-party independence, proper trust/note drafting, and adherence to IRS rules.
- Constructive Receipt Traps: If you “touch” the money or retain too much control, the tax deferral can collapse.
- Debt Nuances: Mismanaging debt payoff can trigger extra gain. Model this first.
- State-by-State Gotchas: State sourcing and conformity vary; multi-state investors need a map, not a guess.
- Sequence Risk: Reinvesting isn’t risk-free. Liquidity is power—but only with a clear policy statement and disciplined execution.
The Human Side: Jordan’s After-Close Life
Jordan wanted three things:
- A year off without financial stress,
- Income that doesn’t require tenants, and
- Dry powder to pounce when the right operating business came along.
The plan delivered: immediate income from private credit and munis, measured exposure to multifamily LPs, and a dedicated opportunity sleeve for acquisitions—without a forced 1031 timeline.
Not because Jordan “beat the system,” but because Jordan respected the system—and used timing, structure, and intent to let capital breathe.
Key Numbers at a Glance (Fictional, Rounded)
| Item | Scenario A: Conventional | Scenario B: Deferred/Structured |
|---|---|---|
| Price | 18.6M | 18.6M |
| Est. Closing Costs (2.5%) | (0.465M) | (0.465M) |
| Debt Payoff | (7.85M) | (7.85M) |
| Pre-Tax Equity at Close | 10.285M | 10.285M |
| Year-1 Taxes | (5.48M) | 0 |
| Cash Immediately Invested | 4.805M | 6.10M |
| 10-Yr Modeled Portfolio (net of drag) | 7.705M | 10.845M |
| Taxes Paid Over 10 Yrs (Nominal) | N/A (mostly Yr-1) | (3.95M) |
| Modeled Advantage vs. A | — | ≈ +3.14M |
Triple-Check Reminder: These numbers are not promises or predictions. They’re fictional illustrations to show how structure + timing might change an outcome. Your mileage will vary.
A Quick “Am I Ready?” Checklist
- I know my after-tax number, not just the sale price.
- My team has modeled recapture, NIIT, and state impacts.
- I’ve mapped debt vs. basis to avoid phantom income.
- I have a written reinvestment policy for post-close capital.
- I’ve explored deferral options that fit my goals and timeline.
- I’ve coordinated among CPA, tax attorney, and planner—before signing.
If you hesitated on any of these, you’re not alone. Most owners call us after they ink the LOI. We’d rather meet you before you do.
The Wealthrive Takeaway
Real wealth isn’t the headline sale number—it’s what you keep and how free you feel afterward. Align tax timing with life timing, and your capital becomes calmer, stronger, and more useful.
That’s how you thrive beyond taxes. Wealthrive
Important Disclosures
- This article is fictional and for educational purposes only. It is not tax, legal, or investment advice.
- Strategies described may be unsuitable, unavailable, or impermissible for your situation.
- Always consult qualified professionals before taking action.
Ready to explore your options?
Book a confidential Wealth Strategy Session to pressure-test your exit plan and model your after-tax outcomes.
→ Schedule here: info.wealthrive.com/thrivebeyondtax
