Lump or installment payment: Sellers of lease cash flow may decide to sell for a one-time payment or a series of guaranteed payments, which typically range from a few years to 20 years or more. Installment contracts should only be considered with large listed buyers (i.B. tower companies) and differ from monthly lease payments in that they are guaranteed and not prematurely resilient the landowner (as is the case with the vast majority of wireless leases). Mobile phone companies can purchase perpetual land easements for the placement of radio towers with cellular repeaters. Because a perpetual easement gives businesses permanent property rights, the Internal Revenue Service treats the sale of perpetual easements as a sale of real estate. For the landowner, this treatment has significant tax advantages. The sale of cell tower rental rights or cash flow for a period of 99 years or more (until eternity). When selling rental rights or cash flows for 99 years or more, tax authorities have always referred to such sales as the equivalent of a simple transfer of fees and, as such, assuming that the property was held for a year or more prior to the lease sale, the seller may be eligible for long-term capital gains treatment. and some argue that they may also be eligible for a 1031 exchange of rental sales proceeds. But wait, what does this have to do with renting and buying cell towers? In this article, we will give a complete overview of a 1031 exchange and how Landmark Dividend can help you get the most out of our cell tower lease. The sale of cell tower rental rights or cash flow for a specified period of time and less than 99 years is generally considered by tax authorities as an acceleration of lease payments (income) and can therefore be taxed as ordinary income rates based on the total amount received by the owner in the form of “accelerated lease payments”. Call us today to discuss your tower rental buyback transaction. We tailor your transaction to your needs – not to the needs of the buyer.

Our customers always come first and we listen to you. In addition to the rental sale considerations mentioned above, a seller of a cell tower lease should consider the potential tax implications. In short, the sale of cell tower leases falls into one of two categories: If you want to learn more about our Unit Exchange Program, the 1031 or tower redemptions, please call us today at 1-800-843-2024 or click here to submit your information. There are never costs or obligations to talk to us. We are here to provide you with simple information to help you make the best possible financial decision regarding your cell tower rental. The landlord transfers the rights to receive cash flow from the current lease (and sometimes the successor lease) to a third party. Most of the time, the cash flow allocation has no effect on the rental space or lease and only changes the name of the beneficiary in the lease in exchange for a lump sum payment (or a series of guaranteed instalment payments). Just like in the case of an easement (as mentioned above), the sale of lease cash flows can be short-term, long-term or permanent. As with the sale of a capital asset, you must first determine what your tax base is in the country where the easement was sold. However, you cannot use the tax base for your entire property. Instead, you only have to allocate the part of the plot that is subject to eternal servitude.

For example, suppose you acquire 10 acres of land for a base cost of $1 million. If only one of these acres is subject to easement, allocate 10% ($100,000) of your total tax base per acre, as this represents 10% of the 10 acres. With a cellular easement, you can now proceed with a 1031 exchange and avoid capital gains tax on your transaction as long as the funds are in a similar property. Most easements are perpetual, meaning they work with the land (in California, a permanent easement lasts 99 years), although fixed controls for cell towers are not entirely unknown. The answer is that it all depends on how you structure your buyout of cell phone tower rental. Remember that it is important that you choose your preferred structure BEFORE going through the sales process with a buyer. There are two main structures used in cell tower buyback transactions. Below, we will discuss the 2 most common methods to manage a cell tower lease. The direction a landowner takes should be determined by a tax professional. Yes! A common tax strategy for sellers, especially towards the end of the year, is to split the buyback lump sum payment for cell tower rental into two payments. One payment was made at the close of the current taxation year and another on January 1 of the following taxation year.

There is no single answer to the question of how a cell tower lease will affect your taxes. The answer depends on your current income and investment portfolio. It is strongly recommended that a property owner have each transaction reviewed by their CPA or tax advisor. A cell tower company may make claims, but your individual situation will confirm or dispute those claims. The landowner must respond at the time of the tax. Uncle Sam will still want his share, but you may be able to control with a 1031 swap to vary. Under Section 031 of the IRC, a well-structured 1031 exchange allows an investor to sell a property, reinvest the proceeds in a new property, and defer all capital gains taxes. The seller must identify an investment property within 45 days of the exchange period and the exchange period has a maximum period of 180 days. If you`d like to learn more about how 1031 replaces your cell tower rental, we`ll work with experts at 1031 Exchange to help you properly structure your transaction. If a cell tower lease buyback is structured to place a cell easement under the cell tower location, the cell tower lease is converted into a real estate sale. A cellular easement is like any other type of easement: it is a legal agreement between two parties (in this case, a landowner and a mobile phone provider) on the rights to use the land for specific purposes.

The sale of a permanent easement offers you the opportunity to defer the resulting taxable profit by entering into a similar exchange transaction. The basic requirement of similar exchange rules is that you reinvest the proceeds from the sale of the easement in similar land. However, you must identify the similar property within 45 days of the sale of the permanent easement. In addition, the purchase of your similar property must be completed within 180 days of the sale of the easement or the deadline for filing your next tax return, whichever comes first. If you decide to buy a similar property, your base in the new property will be the same as the base you have in the easement. Therefore, you do not record a taxable profit until you sell the similar property. Our recommendation is never to sign a letter of intent with a leasing buyback or tower company until you have consulted your tax advisor or CPA about the tax implications of a lease sale. If you don`t have a CPA or tax advisor, you should find one. Do not take the word of the agent of the leasing buyback company on the amount of taxes for a lease buyback. They don`t know your tax situation and shouldn`t advise you.

Leaseback companies have asked a reputable accounting firm to provide memos suggesting why they believe your lease buyback income should be treated as a capital gain. These memos are generic and you should not assume that they apply directly to your situation. In addition, only your tax advisor can advise you on whether it is better to hold the lease and sell it now or in a subsequent taxation year. We can`t stress enough the importance of having your contract reviewed by a tax professional before signing a letter of intent. .