Overpay or pay the tax? – Orange County Register

You’ve sold your commercial real estate. Proper steps have been taken to funnel the sale proceeds into a qualified intermediary as the first step to perfecting a tax-deferred exchange – a way to buy more commercial real estate and defer the tax obligation.

A careful review of buildings available for sale has given you a sense the market is over-heated. You are concerned you might overpay for a building — effectively paying more than the building will be worth in future years. After all, it’s a great time to sell but not a great time to buy.

So, is it better to overpay today and risk the building declining in value or simply pay the taxes – which could amount to 35 percent of your take.

One thing is certain. If you don’t buy commercial real estate and perfect your exchange, you WILL pay the taxes. Let’s use a hypothetical amount of $2 million as the sale price for the…

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