The Sale of a Farm

Two brothers sold their farm for $6.4MM. The farm was burdened with $4MM in debt:

• $3.6MM on the land and
• $400K from operating expenses.

Initially, their CPA projected they would net $200K of income after-tax from a lump sum cash sale.

By using a Structured Installment Sale with payments over 8 years, we were able to provide them with a much better solution. After closing the sales, the farmers were able to take a pledge loan for $4.8MM. This included:

• $400K in cash at the closing to cover their operating expenses
• $3.6 MM to cover the Bridge Loan that was used to eliminate all their debt on the land prior to the closing. By doing this, they avoided creating an immediate taxable event by paying off the debt within the closing.
• A $1.2MM tax free cash loan after close of escrow

By using a Structured Installment Sale Strategy for their sale, these two farmers were able to receive $1.2MM in cash net of taxes and loan payments instead of just $200K from conventional sale. This increased their cash flow yield from the sale by 6 times over a conventional sales process.