What the building actually nets

Subtraction one: cash at closing

An owner who had held a Little Havana fourplex for twenty-two years agreed a price on a Friday and spent the weekend planning around it. The building had been operated well: low vacancy, steady rents, every improvement depreciated on schedule. The number that reached the account was not the number on the contract, and the larger of the two subtractions had been built by the good years.

Owners quote a price. Almost nobody quotes a net.

I would sell at two and a half is a sentence about a headline number, and the headline number is the one figure in the entire transaction that nobody actually receives. Between the contract price and the money that ends up in an account there are two separate subtractions, they run on different rules, and the second one surprises people who have owned well for a long time.

The uncomfortable version: the better a building has been operated, the larger the second subtraction tends to be.

The first subtraction is the one everybody knows. Off the contract price come the payoff of any mortgage, the prorations, title and closing costs, the negotiated brokerage fee, and the documentary stamp tax on the deed if the contract puts it on the seller, which is a matter of contract and local custom rather than statute.

That last item is worth stating precisely, because Miami-Dade is not the rest of Florida. The documentary stamp tax rate in Miami-Dade County is 60 cents per $100 of consideration, and the County also imposes a surtax of 45 cents per $100 on properties that are not single-family residences. An apartment building is not a single-family residence. Both apply, the combined rate is $1.05 per $100, and on a $2,500,000 sale that is $26,250.

Subtraction one produces cash. It does not produce the tax bill, and the two numbers are not related in the way most owners assume.

Subtraction two: the tax layer

The taxable event does not start from cash. It starts from the amount realized, and it subtracts adjusted basis, not debt.

Adjusted basis is roughly what was paid for the property, plus capital improvements, minus depreciation taken. That last term does the damage, because depreciation is a deduction the owner has been taking every year, and every dollar of it lowered the basis.

The resulting gain does not get taxed at one rate. It splits.

1. The depreciation portion. Gain attributable to the straight-line depreciation already taken is unrecaptured section 1250 gain, taxed at a maximum rate of 25%. Not at the long-term capital gains rate.
2. The remaining gain. Long-term capital gain, taxed at 0, 15, or 20% depending on taxable income.
3. The net investment income tax. An additional 3.8% under IRC 1411 can apply on top of both, depending on income and on whether the activity rises to a trade or business in which the taxpayer materially participates.

There is no Florida state individual income tax layered on this. That is a real advantage of selling here, and it is also the reason so many owners underestimate the federal side. There is only one bill, so nobody has been rehearsing for it.

Put together, those pieces make the structural point emerge. A building held for twenty-five years, depreciated the whole way, and refinanced once or twice can generate a tax liability larger than the cash that shows up at closing. The debt was drawn tax-free. The basis kept falling. The gain did not care.

That is not an edge case. It is the normal end state of a well-run long hold, and it is the single best reason to run the net before choosing a price rather than after.

In theory the owner knows their basis, because it is their own building and their own returns. In practice almost nobody has it at hand. Basis lives across twenty years of tax returns, prepared by two or three different accountants, some of them retired, in a depreciation schedule nobody has opened since it was set up. It is entirely reconstructible and it takes an accountant an afternoon. What we see is owners who will spend three weeks on a price and will not spend one afternoon finding out what that price leaves them. Not because they are careless. Because the price feels like the negotiation and the basis feels like paperwork, and it is the other way around.

The variant path: a foreign seller

For a seller who is a foreign person, one more mechanism sits in front of all of this, and it operates at closing rather than at filing.

Under IRC 1445, the buyer is generally required to withhold 15% of the amount realized on the purchase of a U.S. real property interest from a foreign person. The rate drops to 10% where the buyer is an individual acquiring the property for use as a residence and the amount realized is more than $300,000 but not more than $1,000,000. It drops to zero where the buyer acquires it as a residence and the amount realized is $300,000 or less. Those residence exceptions carry conditions, including that the buyer must have definite plans to reside at the property for at least half the days it is used during each of the first two twelve-month periods after transfer. An apartment building purchase will rarely qualify.

Two things about this are routinely misunderstood.

It is withholding on the amount realized, not a tax on gain. Fifteen percent of the price can substantially exceed the actual tax owed, particularly on a property with a high basis or a modest gain. The IRS provides a withholding certificate process that can reduce or eliminate the amount withheld when the expected liability is lower, and it has to be pursued in advance rather than remembered at the closing table.

The obligation sits on the buyer. FIRPTA makes the buyer the withholding agent, and a buyer who fails to withhold when withholding was required is exposed for the amount. This is why a sophisticated buyer asks about a seller’s status early and without apology. The question can feel personal. It is a question about the buyer’s own exposure, and not a comment on the seller.

The other path: not selling at all

A section 1031 exchange defers the gain rather than eliminating it, and it runs on a calendar that does not bend: 45 days from the closing of the relinquished property to identify replacement property in writing, and 180 days to close, or the due date of the return including extensions if that comes first. A qualified intermediary must hold the proceeds so the seller never takes constructive receipt.

Deferral is not forgiveness. It is a decision to keep the liability and move it, which is the right decision for some owners and an expensive way to buy the wrong building for others.

Three chairs

The seller thinks in price and should be thinking in net and in calendar. The honest strength of that position is that they are the only party who bears the second subtraction, and it is invisible to everyone else at the table. What is hard to see from that chair is that the number they defend most fiercely, the price, is a proxy. Two offers at the same price are not the same offer if one of them closes in a different tax year, accommodates an exchange, or carries paper.

The buyer thinks the seller’s taxes are none of their business. It is a reasonable instinct and it costs them twice. Once because FIRPTA puts a withholding obligation directly on them, with real exposure attached. And once because the seller’s tax position is the best available predictor of where the seller is flexible. An owner with a large embedded gain and no replacement property has a reason to prefer terms over price, and a buyer who understands that is negotiating with information rather than pressure.

The developer treats structure as currency. Where a hold buyer negotiates price, a developer will negotiate closing dates, seller financing, and exchange accommodation, because those move the seller’s after-tax outcome without moving the headline. This is frequently how a developer wins a site against a higher nominal offer.

What that chair tends to underweight is that structure costs time. Accommodating an exchange means running someone else’s 45-day clock. Seller financing means the seller’s counsel, and the seller’s CPA, and a negotiation about default remedies that was not in the schedule.

Our read

Price is what the market argues about. Net is what the owner actually decides on, and the two are connected by variables the owner controls more than they realize: timing, structure, and whether the conversation with their CPA happened before or after the listing.

The fair reading across the three chairs is that this is not a zero-sum item. Most of the levers that improve a seller’s after-tax outcome cost the buyer very little, and several cost the buyer nothing at all. A closing date in January instead of December, a cooperation clause for an exchange, a structure that lets a foreign seller pursue a withholding certificate in advance: these are cheap for a buyer to give and can be worth real money to a seller. Deals die over price all the time when the actual distance between the parties was a calendar.

That only works if somebody at the table knows the whole picture, and no single party does. The seller knows their basis. The buyer knows their timeline. The developer knows their capital. The broker is the only participant positioned to see all three and say out loud where the cheap trades are.

What we would not do is let an owner set a price before they know their basis. It is the one number in this entire article that we cannot look up, that changes the answer completely, and that takes an accountant an afternoon to produce.

Knowing what the building nets comes before deciding what it is worth.

Who to ask

The CPA owns this article. Not partly. All of it. Basis, depreciation taken, how the gain splits, whether the 3.8% applies, what an exchange does to a position: those are answers only someone holding the returns can give, and the same building produces completely different numbers for two different owners. The one thing worth carrying out of here is that the conversation belongs before the listing, not after the contract.

A foreign seller adds counsel who works with FIRPTA regularly, and starts early. The withholding certificate route exists precisely so that fifteen percent of a price does not sit with the IRS when the actual tax owed is a fraction of it, and it has to be pursued in advance. It cannot be fixed at the closing table, which is usually where it comes up.

The closing agent or title company handles the mechanics of the withholding itself, and the paperwork gets walked through at the table. Worth knowing in advance, as general background, that the obligation legally sits with the buyer rather than the closing agent, which is why the buyer’s side asks about seller status early. It is not personal and it is not a negotiating move.

For an exchange, the qualified intermediary has to be engaged before the sale closes. Once proceeds touch the seller, the option is gone.

Our part is different and smaller. We can name which levers in a deal move an after-tax outcome without costing the buyer much, and we can build the negotiation around a seller’s calendar instead of against it. We cannot say what will be owed, and no broker can, ours included. We last checked these sources on August 4, 2026, and tax law moves every session.