John and Mary, husband and wife, have owned an apartment building in Santa Monica for the last 40 years. They originally paid $250,000 for the apartment building but it has been fully depreciated and has a basis of $100,000. The property brings in about $150,000 in cash flow net of expenses. Assume that John and Mary have no children and are more concerned about income in the future than they are on leaving the property to any of their relatives. Assume that the property is worth $15,000,000.

1. What is their total tax liability if they sold the property for $15,000,000? Assume they have taken $150,000 in depreciation.
2. What recommendations, if any could you suggest how they could defer the tax under current tax law.
3. If they traded it for a vineyard worth $20,000,000 and assumed the existing loan of $5,000,000 what would be the tax consequences?
4. Suppose they decided to work with St. Judes Hospital for Children and were willing to make a charitable contribution of the property for an annuity. What type of device would you recommend?
5. Assume they have children and are not in need of immediate cash flow but want to defer the tax and want their children to inherit a good portion of the cash flow but keep it out of their estate. Do you have any recommendations? Hint Irrevocable Insurance Trust