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

KB CAPITAL ADVISORS Asset Backed Installment Sale Presentation 1031 Exchange Alternatives www.kleinbonn.com

23% of Real Estate Investors want To Sell… …but don’t want to use a 1031 Exchange For the Following Reasons KB CAPITAL ADVISORS www.kleinbonn.com

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

01 FINRA registered Wealth Management Firm specializing in tax strategies 02 $130 Million in Assets Under Management KB Capital Advisors, LLC 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 www.kleinbonn.com

Executives & Team , ¡ Kevin Bonn Jessica Monroe Daniel Klein Kimberly Wright Esq. & CPA Real Estate Strategy Director Wealth Manager Esq. KB CAPITAL ADVISORS www.kleinbonn.com

Corporate Partners 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 offices 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. 3rd Party Lenders (Collateralized Line of Credits) KB CAPITAL ADVISORS www.kleinbonn.com

1031 Exchange Process & Problems 01 02 03 04 Close on Identified Sell Property Things Things that that can & can & do go do go Identify 3 Properties Property within 180 wrong wrong within 45 Days Days (timeline Client can’t Client can’t finance finance the the graphic) next next leg leg Properties Properties fail fail inspection or inspection or due diligence due diligence KB CAPITAL ADVISORS www.kleinbonn.com

Federal & State Tax Tables Capital Gains Tax 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% KB CAPITAL ADVISORS www.kleinbonn.com

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 Tax Deferral Pro-Defer Taxes over the course of the installment payments Strategies 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 www.kleinbonn.com

Why Deferral Brings You A Higher Return On Your Investment Plan $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 KB CAPITAL ADVISORS www.kleinbonn.com

Why Deferral Brings You A Higher Return On Your Investment Plan 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 Reinvesting with Leverage Benefits of ABIS $40,000,000 $35,000,000 $3,500,000 $3,000,000 $30,000,000 $25,000,000 $2,500,000 $2,000,000 $20,000,000 $1,500,000 $15,000,000 $1,000,000 $10,000,000 $500,000 $5,000,000 $0 $0 Starting Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Starting Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Amount Amount Series1 Series2 Series1 Series2 Series3 KB CAPITAL ADVISORS www.kleinbonn.com

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. Current 1031 Charitable Remainder Trusts Exchange Pro-Irrevocable Trust, Give to Charity, Huge Tax Breaks, Guaranteed Income for Life typically higher than Rents, No More tenant management Alternatives 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. KB CAPITAL ADVISORS www.kleinbonn.com

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 www.kleinbonn.com

Asset Backed Installment Sale KBCA, Interactive Brokers and Client sign Custody Client sells Asset, and elects 30 Agreement year tax deferral Client hires Agent Buyer funds escrow with cash or and KB Capital Advisors loan, escrow closes. 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 KB CAPITAL ADVISORS costs 2.5%-4.75%, Interest Only, KBCA manages day to day funds, handles IRS forms, and quarterly deferred tax payments. www.kleinbonn.com

ABIS Example $1M $1M Book loan Client Sells Property For $1,000,000, $1 Million in Custodian Account (2.86% Borrows $800,000 at 3.75% Annually Defers $300,000 in Taxes. return on Treasury +$2,383.33) ($82.19 per day, $2,465.75/month) 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) KB CAPITAL ADVISORS www.kleinbonn.com

ABIS Example Client Sells Asset, KBCA, IB and Client sign 30 yr. Deferral custody agreement Client hires Agent and KB Buyer funds escrow with Capital Advisors cash or loan KB CAPITAL ADVISORS www.kleinbonn.com

Thanks! Any Questions? KB CAPITAL ADVISORS www.kleinbonn.com