CHICAGO-The "fiscal cliff" has come and gone. However, for the majority of large commercial real estate investors it will feel like we went over a fiscal mountain. Uncle Sam will be reaching significantly deeper into the pockets of real estate owners. 

Under the American Taxpayer Relief Act of 2012, the top capital gain tax rate has been permanently increased to 20% (up from 15%) for single filers with incomes above $400,000 and married couples filing jointly with incomes exceeding $450,000.

In addition, the new IRC Section 1411 3.8% Medicare surtax on net investment income, which includes capital gains, results in an overall rate for higher-income taxpayers of 23.8% (not including state and depreciation recapture). The bottom-line is a headache inducing 58% increase from 2012! For corporations tax rates also remain high, especially in the case where an individual wants to pull proceeds from a C corporation, as they will be hit with the corporate tax and then the individual taxes mentioned above.

However, not all hope is lost. Two of the most advantageous and popular tax codes that allow deferral relief for individuals and corporations have not been affected. These are Internal Revenue Code (IRC) 1031 and 453. While 1031 Exchanges remain an excellent strategy to defer taxes, they can prove difficult to complete for a number of reasons.  If a client fails to meet the many requirements, such as the 45-day ID or 180 to close, they end up getting their check and losing a large amount of their hard earned gains to taxes. 

Enter the structured sale, which falls under IRC 453, or Installment Sale Treatment. A structured sale allows the taxpayer to transfer all pre-tax proceeds to an investment vehicle, and then design payments over time and pay taxes only on the amount taken for any given calendar year.  Better yet, these payments can be designed to best fit the owner's goals and risk tolerance. 

Similar to a 401k plan, without any of the age or maximum restraints, this has been a popular "fall back" for investors who have failed a 1031 Exchange, but still are interested in a tax deferral strategy.  A structured sale can also be used as a line of credit to access almost all of the pre-tax proceeds - which brokers find useful for their clients since they can plow those deferred proceeds back into real estate or use it as a "parking lot" for their clients.

Between the rebound of real estate and much higher tax rates, 2013 will require brokers to understand deferral so they can be the best resource for their clients.

Christopher J. Princis is Senior Vice President of Brook Hollow Financial. He can be contacted at [email protected] or 312-529-4017. The views expressed in this column are the author's own.