Tax Sale Guide Home
Parnerships
Chapter: TAX SALES AS A BUSINESS
Dave
Background:
I have often said that if you contribute you may get some rewards you don't expect and recently it has become true. We all get enough email garbage but occasionally there are exceptions. It looks like this is one of them and I have an interesting decision to make.
While I don't know all of the details it would appear about 3 plus decades ago a few rather smart businessmen not too far from my neck of the woods decided to form a tax sale purchase partnership. The partnership had all the necessary elements financial, legal and
real estate sales with deep pockets and what they did not know themselves they could buy the right engineering and planning talent. Obviously the exact details will not be public.
Like some of the oldtimers here they took a long term view. To day it appears some people on this board get upset if they can't flip the property in six months. As I am finding myself in the rural municipalities things don't always move at Toronto paces.
As far as I can determine these guys did most of their buying around a quarter plus century ago and held many of them for a long time. They gradually sold them to the market 1 - 2 a year for income. Like all human beings though time moves on and the majority of the original
members have died off and the survivors are in failing health. They have sold off of the easy to sell their original porfolio and now want to disolve the partnership. The remnents are rural soon to be urban land but I am clear of all of the the McGuinty challenges like oak ridges morraine. .
They have sold all of the easy stuff and the remainder has great potential but needs some work. Its like buying beef direct from the farmer. There is no doubt that it is grade A angus beef I can touch and feel it. However it will need a lot of work by a skilled butcher to turn it into the steaks we all want. Like buying a herd of cattle I will have have to be patient and wait for some of the critters to grow up.
Their terms are simple; regular real estate deal, all or nothing; cash payment. Pricing is very attractive however as they just want to wrap things up. Its a little closer to Toronto then my regular stomping grounds but in the right direction and within commuting distance.
Question:
Never having been through this before my question is a simple one. What are the pro's and cons of buying (the shares) of the partnership versus the land direct for both them and me? The final price remains to be set but they don't want to screw around to put it bluntly and they expect the same in return.
netpred
Check with a lawyer, but if you buy the shares of the company, you are buying all of the assets (good) and all of the liabilities (really bad). There is no telling the extent of the liabilities - especially over 20 - 30 years!
They want to sell the shares so that the shareholders will pay tax on capital gains instead of paying income tax on the money they take out of the company from the sale of the land.
DF1
You should be able to get a lower price if you buy the shares, since the sellers will pay less tax, but you take on any liabilities of the company, including any litigation that could crop up from the past.Any debt should be easy enough to ascertain, but who knows what lawsuits could be lurking. Talk to a lawyer about seperating the company's liability from your personal or other buisiness interests. If it is a partnership, not a corporation, rules may be diferent.