Qualified Intermediary, Section 1031 Exchanges, Iowa, Midwest, and across the US

The Farm Bill Does Not Alter the Definition of “Like-Kind” in Regards to Section 1031 Exchanges

2008-06-23T16:35:42Z

In order to clarify things in the mind of anyone who is uncertain about it, the farm bill that was passed by Congress does not include the language about like-kind status that those of us in the exchange industry were concerned about. The Senate version of the bill sought to redefine the term “like-kind” as it applies to agricultural ground. The crux of the change was to make land that generated any sort of subsidy from the government for its owner non-like-kind to any other real estate investment. The central objection to that provision, in my opinion, is that the government essentially imposed the subsidies on farmers over the years and it is not equitable to now make it so those same farmers could not exchange out of their long-term investments into something more manageable in their later years.

While this is good news indeed, investors and real property owners all across the country should remain vigilant with regard to potential changes in Section 1031. The mere idea that Congress took a shot at changing like-kind status as a means to raise additional funding for their other activities is cause for concern. Considering the possibility of chipping away at the provisions of Section 1031 is frightening.

Ken Tharp

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

The Presidential Election and the Potential for Change in Capital Gain Rates

2008-06-04T20:07:21Z

Now that things look to be settled on the Democratic side of things, how do the two candidates look at the current capital gain tax rates? Both candidates seem to be focused on “change” at the moment; does that extend to the capital gain tax rate?

The presumptive nominee on the Republican side, Senator John McCain, expresses the intent to leave the rate at its current level of 15%, which was reduced from 20% in the Income Tax Act of 2003.

The as-of-last-night-presumptive nominee of the Democrats, Senator Barack Obama said early in the campaign that he would move to raise capital gain taxes to at least 20% and not more than 28%. At one point during the debate in Philadelphia, Obama said, “…I would look at raising the capital gain tax for purposes of fairness.”

In the past decades, raising the capital gain tax rate has resulted in decreased revenues. By the same token, when the capital gain rate decreased, revenues increased. Even though Obama’s intentions, if enacted, would in all likelihood result in more taxpayers who were interested in performing tax-deferred exchanges, I cannot support an increase in the tax rates for capital gains. If you have an opinion, please let me know in the comments section.

Regardless of whether the capital gain tax rate is reduced, increased, or left the same, Section 1031 tax-deferred like-kind exchanges will continue to help taxpayers avoid paying those taxes today. It is very common for people to have questions about 1031 exchanges. Please feel free to ask us any questions that you might have about the process.

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Memorial Day - National Moment of Remembrance

2008-05-23T17:18:46Z

Before I leave my office for the day, I want to make you aware, if you are not already, of the National Moment of Remembrance scheduled for Monday, May 26 at 3:00 PM.

The following information is from www.remember.gov:

Memorial Day Event

The National Moment of Remembrance, established by Congress, asks Americans wherever they are at 3 p.m., local time, on Memorial Day to pause in an act of national unity (duration: one minute).The time 3 p.m. was chosen because it is the time when most Americans are enjoying their freedoms on the national holiday. The Moment does not replace traditional Memorial Day events; rather it is an act of national unity in which all Americans, alone or with family and friends, honor those who died for our freedom. It will help to reclaim Memorial Day as the sacred and noble holiday it was meant to be. In this shared remembrance, we connect as Americans.

How to Participate

Wherever you are, observe the Moment at 3 p.m., local time, on Memorial Day. Ask others to remember—relatives, friends, church, neighborhood, or co-workers to observe the Moment at places such as your neighborhood, local pool, picnic grounds, etc., for one minute of Remembrance. Participation can be informal as ringing a bell three times to signify the Moment.

Why

To provide a time of Remembrance for America’s fallen and to make a commitment to give something back to our country in their memory. To have Americans participate in an act of national unity and demonstrate gratitude and respect for those who died for freedom since the founding of our Nation. To provide a sense of history to our citizens and ensure that younger generations understand the sacrifices made to preserve our liberties.

Background

The idea for the Moment was born when children touring the Nation’s Capital were asked by the Commission’s Director what Memorial Day means. They responded, “That’s the day the pool opens.” A Gallup Poll revealed that only 28% of Americans know the meaning of this noble holiday. The White House Commission on Remembrance was established by Congress (PL 106-579) to promote the values of Memorial Day by acts of remembrance throughout the year. The major initiative of the Commission is the National Moment of Remembrance.

Please pass this on and remember to remember on Monday. We all owe these heroes so much more than 60 seconds of our time.

Ken Tharp

Merely the Form of the Investment Changes…

2008-05-19T15:33:19Z

One of my favorite explanations for why the Internal Revenue Service allows taxpayers to sell a property and defer the capital gain tax on the sale of that property through the use of a Section 1031 like-kind exchange contains the words in the subject of this article.

The explanation goes like this: the IRS allows the taxpayer to defer the payment of capital gain taxes on the sale of a property in an exchange because the investment itself does not change, merely the form of the investment changes. When you think about that, it is really quite incredible that this great wealth-building tool is available to us. Investor Jones invests $10,000 to purchase a $100,000 duplex. After ten years, he sells the property within a Section 1031 tax-deferred exchange and purchases an 8-plex. He might have increased his equity in the duplex to $40,000 during those ten years and paid $400,000 for the 8-plex, but the IRS does not recognize the gain if done properly because only the form of the investment changed, not the investment itself. In another ten years (or sooner, if he chooses), Investor Jones can repeat the process. In fact, he can defer his capital gain taxes for his entire life if he wishes. And at his death, his heirs inherit his properties at their “stepped-up basis.” (I.e., their fair market value at the time of his death.) If those heirs choose to sell at that time and the properties sell for their fair market value, there is no capital gain tax to be paid because there was no gain from the stepped-up basis.

Section 1031 is an amazing benefit that is available to all taxpayers who own property purchased for investment or used in the pursuit of a business or a trade. Be sure that you and your clients are taking advantage of this benefit when a desire to change the form of an investment occurs.

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If you have questions about Section 1031 like-kind tax-deferred exchanges, please consider IOWA EQUITY EXCHANGE as your source for answers. We handle all types of exchanges. Experience The Power of the Tax-Deferred Exchange! Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange.

Ken Tharp

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Merely the Form of the Investment Changes… * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Are Your Income Properties a Business, an Investment, or Both?

2008-05-16T16:10:48Z

Are your income properties a business, an investment, or both? I suspect most property owners would say they are both. That’s how I feel about mine. They certainly qualify as a business, but the primary reason I bought them was as an investment for the future.

Why does this matter? Because unless you own income property strictly as a business, you should be concerned with maximizing the investment quotient of your properties. How can this be done? There are several answers to that question, but one in particular is of interest to me in this article.

Off the top of my head, I can think of these ways to maximize your investment in your properties: 1) keep them well-maintained; 2) keep them rented to good tenants who pay regularly; 3) do what you can to lower expenses.

In addition to these and other “nuts and bolts” ways to maximize your investment, the investor should consider whether his equity is being well-utilized. Let’s define the term “investment” for purposes of this article as “the difference between a property’s value and the debt on that property.” Using this definition, “investment” is another word for “equity.” (There are two articles about increasing one’s return on equity in my blog postings: Ways to Increase Your Return on Equity and Return on Equity, in case you would like to read more about my opinion on this subject.)

Here’s an important thing to keep in mind that many overlook: As time passes, the value of your property increases (in a normal market!) and the amount of your debt decreases. Obviously, this means that your equity in the property rises. While the income from the property may also rise (usually the expenses rise, too), typically when net income is compared to equity, return on equity decreases over time.

What can be done about this phenomenon? After all, we all like that high percentage of return on equity that we got when we first bought that property, right? The answer is that you have to release some or all of that equity to work for you in another way. Refinancing the property can release a fair amount of the equity in your property, but not all of it. Usually a lender will require that the investor maintain 20% or so of his equity in the property during a refinance. Sometimes that’s okay. Another alternative to release equity is to sell the property and reinvest in a more expensive property. The problem with this is that a significant portion of your equity is going to go to the Internal Revenue Service in capital gain taxes and depreciation recapture, and to your state if state capital gain taxes apply.

The solution to releasing your equity to go to work for you elsewhere is found in Section 1031 of the Internal Revenue Code, which allows you to sell your property, defer all of your capital gain taxes and depreciation recapture, and put your equity to work in new property that will generate a higher rate of return.

If you have questions about exchanging, please let us know. We handle all types of exchanges. Experience The Power of Tax-Deferred Exchanges!

******

Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange.

Ken Tharp

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Are Your Income Properties a Business, an Investment, or Both? * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Section 1031 Exchanges - Tax-Deferred or Tax-Free?

2008-05-02T12:14:05Z

Did you know that after you use a Section 1031 exchange to acquire new property, you will face the same tax-related issues when you decide to sell that property? Is there any way around paying capital gain taxes when you sell your property? With the issuance of Rev. Proc. 2008-16 and some advance planning, there are now two answers to that question instead of one. The one answer we always used to have was, "Yes, there is a way, but you have to die to accomplish it." (When a property owner passes away, property owned passes to heirs at a stepped-up basis, i.e., the value of the property at the time of death. If the heir(s) sell for that value, there is no capital gain. Helpful for your heirs, but not too much that you can do with it.) That answer isn't one that most people want to hear. Now, however, there's a new, more acceptable answer in the affirmative.

Let's assume that Mr. and Mrs. Jones own a farm worth $800,000 that has a tax basis of $200,000. (Substitute "apartment building," "business location," or whatever fits your situation for "farm.") Further, let's assume that Mr. and Mrs. Jones do not live on this farm, so there is no personal residence exclusion available to shelter some of their $600,000 capital gain if they were to sell. They're not too thrilled with the prospects of being taxed on a $600,000 capital gain on this year's taxes, but they do want to sell. What to do? How about this:

Mr. and Mrs. Jones sell their farm as the relinquished property in a Section 1031 exchange.
As their replacement property in the exchange, they acquire two vacation houses, each worth $400,000 (House #1 and House #2)
Mr. and Mrs. Jones rent the two properties in accordance with the new IRS Revenue Procedure 2008-16, which sets clear requirements for vacation home property to qualify for a tax-deferred exchange.
After a period of time (at least two years to satisfy the requirements of Rev. Proc 2008-16), Mr. and Mrs. Jones sell their residence using the personal residence exclusion provisions of Section 121 of the Internal Revenue Code and move into House #1.
After occupying House #1 for a period of at least two years to establish it as their personal residence, Mr. and Mrs. Jones sell it using Section 121 to exclude their capital gain and move into House #2. (I think you can finish the steps yourself.)

Can we quantify the benefits of such a strategy? Mr. and Mrs. Jones exclude the original $600,000 of capital gains from taxation. In addition, they can shelter the appreciation of their vacation homes over the period of time they own them (to the extent of the $500,000 limit on each residence). This strategy results in three interrelated benefits:

The exiting of the business of owning the farm land (or apartment house, or whatever),
The exclusion of otherwise taxable capital gains, and
A potentially large addition to their liquid assets for retirement.

Is this legal? Darned straight it is.It may or may not be something that you or your client would ever want to actually implement, but perhaps it will help you better realize the tremendous benefits that Section 1031 of the Internal Revenue Code affords us all when we plan properly.

(We strongly urge you to consult your tax advisor to see how this exit strategy could apply in your situation.)

******

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Section 1031 Exchanges - Tax-Deferred or Tax-Free? * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Iowa Landlord Association Event on 4/17/08

2008-04-16T15:24:45Z

On April 17, 2008, the Iowa Landlord Association will sponsor the 2008 Spring Educational Seminar and Trade Show at the downtown Holiday Inn, 1050 6th Avenue, in Des Moines. The event starts at 8:00 A.M. and runs until 3:30 P.M. The speakers and their subjects are as follows:

Dave Sollenbarger, ILA Director and Past-President – Introductions and ILA Update
Tom Good, Iowa Civil Rights Commission – “Fair Housing / Discrimination”
Joe Kelly, Lobbyist – Legislative Updates for 2008
Gordon Kratz – “Effective Communication Techniques”
Ron Bugennagen – “The GREEN rewards of Energy Efficient Rental Housing Clinic”
Mark Hanson, Attorney – Legal Issues
Officer Larry Rogers, D.M. Police Department – “Crime-Free Housing”

Iowa Equity Exchange will be present at the event as a vendor/exhibitor. Please stop by our table and register to win a $25.00 gift card to Best Buy! It promises to be a fun- and fact-filled day! More information can be obtained on the ILA web site.

******

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Iowa Landlord Association Event on 4/17/08 * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

IRS Subtly Encourages Compliance – An Example

2008-04-06T18:35:31Z

A few weeks back, the Internal Revenue Service and the Tax Division of the Justice Department took action to encourage potential exchangers to comply with the rules of Section 1031. (In reality, the IRS had little choice given the blatant fraud that was allegedly perpetrated.)

A gentleman named William Franklin Jones of Park Rapids, Minnesota, is accused of reporting bogus Section 1031 tax-deferred like-kind exchanges of property that he owned. The allegations contained in the indictment indicate that Mr. Jones sold property that he owned, initiated a Section 1031 tax-deferred like-kind exchange, identified replacement property that he already owned, then “purchased” the property he had identified, allowing him to take the cash from the sales tax-free, a flagrant violation of the rules of Section 1031.

The scheme: Mr. Jones has not been convicted as of this date, so he is entitled to the presumption of innocence. That being said, the scheme went something like this: Mr. Jones sold properties that he owned. The funds from the sale of those properties were placed into exchange accounts held by a qualified intermediary. (It is unclear whether the intermediary was part of the scheme or was unaware of what was taking place.) Mr. Jones then proceeded to identify his replacement properties, which were actually properties that he already owned. The “sellers” of those properties were actually friends of Mr. Jones. Those “sellers” signed Quit Claim Deeds transferring the properties to Mr. Jones. The qualified intermediary who was holding the funds transferred those funds into accounts that Mr. Jones opened in the names of the “sellers.” The net effect of these actions was to allow Mr. Jones to sell his properties and avoid the capital gain taxes that should have been paid on those sales, end up with the cash in his own pocket (with the assistance of his friends, the “sellers”), and wind up owning the other property that he actually already owned.

Hardly proper, and hardly something that the IRS could ignore once they learned of it. Mr. Jones now faces 21-27 months in the Graybar Hotel for his attempts to avoid the $90,000 in taxes he should have paid.

A word to the wise—Section 1031 tax-deferred like-kind exchanges are a powerful tool for the creation of wealth, but do not abuse them.

******

Ken Tharp

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * IRS Subtly Encourages Compliance – An Example * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Ways to Increase Your Return on Equity

2008-04-04T16:48:56Z

This is a follow-up to a posting written yesterday about Return on Equity. In that blog, I promised to return to offer solutions for increasing the investor’s Return on Equity, and that is the subject of this post.

Please check out yesterday’s blog if you have any question about what Return on Equity is and why it is so important to monitor the ROE of an investment. Assuming that you’re up to speed on that, let’s investigate what can be done to maximize Return on Equity.

To increase your ROE in the world of real estate, you must re-leverage your equity periodically. In English, that means you need to get the equity out of your investment and use it as a down payment for another investment. How can that be done? I can think of three ways:

Sell the property.
Refinance the property.
Exchange the property.

One by one, let’s discuss these alternatives:

Sell the property. A logical solution, but there are tax ramifications. A healthy portion of your equity is going to be eaten up by those pesky taxes. While it is certainly possible to re-leverage your investment this way, it’s not a smart way to increase your ROE.

Refinance the property. Better, but still some problems. In most cases, you will not be able to pull out 100% of your equity. Your lender may limit you to 80% loan-to-value, or some other percentage. If you have great enough equity in your property, you may be able to raise a significant amount of money by refinancing, but you generally will not be able to get at all of it. Nor may you want to even if you can; the potential negative cash flow that could result may be burdensome.

Exchange the property. Since my company is in the exchange business, it may seem a forgone conclusion that I might claim that exchanging is the best way to re-leverage equity to increase ROE. But let’s dig deeper. A successful exchange allows the investor to release all of his equity from a property to use in new property (minus the costs of the sale; there are costs associated with virtually any solution). This can be a tremendous wealth generator. Take an individual who owns a $100,000 property free and clear. Setting transactional costs aside for a moment, by releasing that equity into a new investment, the investor could conceivably purchase a $500,000 property using his $100,000 equity as a 20% down payment. Again, setting aside the other benefits of ownership addressed in the previous blog (CFBT, Principal Reduction, and Tax Savings), if the two properties appreciated at the same rate, let’s say 4% per year, in five years his old investment would be worth $121,665. By exchanging into the new property, in five years the new property’s value would be $608,326. His equity would be $86,661 more than had he left it in the old property ($108,326 minus $21,665).

Stated another way, his $100,000 equity would have grown to $121,665 if he had stayed in the old property. By exchanging into the new one, his $100,000 equity grew to $208,326. And again, this disregards the other benefits of ownership cited in the paragraph above, which would likely all be higher in the new property as well.

To conclude, examine your Return on Equity every year or so. When you can do better in a new investment, exchange out of the old and into the new. Don’t get married to your properties! Move on and move up!!

******

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Solutions to Increasing Your Return on Equity * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Return on Equity

2008-04-03T17:08:46Z

Return on Equity is the subject today. In an earlier blog, I promised to get back to the ideas that were presented last Saturday at the Omaha Landlord Association’s event that featured Tom Lundstedt, “the funniest investment and tax guy in America.” The crux of what I took out of the seminar was that we should all examine our RETURN ON EQUITY periodically (Tom suggests once annually) and shift our equity into more lucrative investments when it is clear that a better return can be obtained.

First off, let’s highlight the four means of making money in investment real estate:

Cash Flow Before Taxes (CFBT)—what’s left over after you’ve fulfilled all of your obligations relating to the property.
Principal Reduction—each month that you make a mortgage payment, your tenants are buying the property for you.
Income Tax Savings—you get to tell the government that you’re losing money
Appreciation—while the property is going up in value (most of the time…).

Let’s now go to an example. Here are the assumptions: Fifteen years ago, you bought a rental house for $100,000. You made a $15,000 down payment on the house. The first year, your CFBT, Principal Reduction, and Tax Savings amounted to $2,800. Before even considering any appreciation, your Return on Equity in the first year was 19% ($2,800 divided by $15,000). As Tom would say, “Plus appreciation? You’re an investment genius!”

Next set of assumptions: CFBT increases annually. Principal continues to be reduced every year. Taxes continue to be treated in the same manner as they were in Year One.

Here’s a pop quiz—after fifteen years of this pattern, is your Return on Equity higher than in Year One, or lower than in Year One? Think about that while you review the next set of assumptions:

Year Fifteen Assumptions: CFBT has increased from the first year’s figure of $934 to $2,500. In the first year, principal reduction was $784; in Year Fifteen it is $2,232. The property is still sheltering some of its income from taxes, but not all. The depreciation of $3,091 per year is not enough to completely shelter the $4,732 in CFBT plus Principal Reduction. In a 35% bracket, $574 will have to be deducted from the $4,732, which results in a net of $4,158 (excluding any appreciation again). So the net from the property before appreciation has gone from $2,800 to $4,158. Now to answer the question in the previous paragraph.

If you apply the Year Fifteen return of $4,158 to the initial investment of $15,000, you’d have a pretty nice return of 28%. But is $15,000 still your equity in this investment? Hardly…

At a rate of appreciation of 3.5% (certainly not stellar appreciation over the long term) and assuming that the $100,000 you paid in Year One was fair market value, after fifteen years the house would be worth $167,500. And after fifteen years, your loan balance would be paid down to $64,113 (that’s at 7.5% with a 30 year amortization). Your gross equity in Year Fifteen has risen from the $15,000 that you invested to $103,387! ($167,500 minus $64,113.) Applying the $4,158 return to that number results in a Return on Equity of only 4.0%!! ($4,158 divided by $103,387.) That’s a traditional passbook savings rate, but you have to manage the property to get it—not my idea of a good investment.

This blog has gotten very long and very cumbersome with all of the numbers, so let’s close it out with a promise to do the next blog on the solution to the declining Return on Equity. I’ll give you a hint in advance—it has a lot to do with my business of tax-deferred exchanges. Thanks for reading.

******

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Omaha Landlord Association Event, March 29, 2008

2008-03-30T20:33:17Z

Last Saturday, March 29, 2008, the Omaha Landlord Association put on a great event. The day featured speaker Tom Lundstedt (www.tomlundstedt.com), who is billed as “the funniest investment and tax guy in America!” Based on my experience on Saturday, if he is not the funniest, I don’t know who is. (By the way, I am posting this after the fact because I did not find out about the event until last Thursday.)

The reason I was there, from two hours away in West Des Moines, was to be one of the exhibitors who were able to expose their services and products to the 200 or so attendees, all of whom were involved in real estate investments in some way or another.

Mr. Lundstedt spoke for about two hours on “How to Build Wealth in Real Estate.” Some of the topics that he touched on were purchasing real estate within your IRA, how to analyze a potential investment, and how to determine when it is time to move your equity into a new investment. Most importantly for my business, Tom spent about the last five minutes of the talk espousing the benefits of Section 1031 exchanges. My table was a fairly popular place after the presentation came to an end and the attendees moved into the room of exhibitors thanks to Tom’s comments.

I’m planning a blog or two in the next week or so that are based on Tom’s comments. As a long-time investor and qualified intermediary for Section 1031 like-kind exchanges, I found them very insightful.

******

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Omaha Landlord Association Event, March 29, 2008 * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Iowa Land Price Survey Shows 12% Rise in Six Months

2008-03-25T14:29:48Z

A recent survey of farmland real estate brokers shows that the price of Iowa’s best farmland rose by an average of 12 percent from September 2007 through February 2008. This survey was conducted by the Iowa Farm and Land Chapter 2 Realtors Land Institute, as it has been done every March and September since 1978. The RLI is composed of real estate brokers who specialize in farm and land sales, farm management, and appraisals. The results were cited in an article in the Sunday Des Moines Register on March 20, 2008.

Troy Louwagie, the survey chairman as well as a real estate coordinator at Hertz Farm Management in Mount Vernon, had this to say about the results of the survey: “This was the highest dollar-per-acre number we’ve ever had, the second-highest six-month gain, and the third-highest annual increase over the 30 years since the survey began.”

Mr. Louwagie cited the following factors as contributors to the increase:

increased corn and soybean prices
ethanol industry expansion
a limited amount of land available for purchase
good crop yields during the last growing season
a generally positive attitude about agriculture
relatively low long-term interest rates
higher cash rents for farmland

Some of the concerns mentioned by respondents to the survey were uncertainty about the outcome of the current debate in Congress about the government farm program, ever-increasing fuel and fertilizer costs, and the decreasing returns of the livestock industry.

For the survey, the state is divided into nine districts. Five of those districts had per-acre averages of more than $5,000 in this survey, compared to only one district with such an average in the September 2007 survey.

Even timberland, often purchased as recreational and hunting ground, showed the same 12% average rate of increase over the six-month period, averaging $2,045 per acre.

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Iowa Land Price Survey Shows 12% Rise in Six Months * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Two Rivers Real Estate Investor’s Association Meeting

2008-03-14T15:21:51Z

I have been honored with an invitation to speak at the Two Rivers Real Estate Investor’s Association monthly meeting on Wednesday, March 19, 2008. The meeting will be held at the Agribusiness of Iowa Building, 900 Des Moines Street, Des Moines, IA, from 6:00 pm to 7:30 pm. Click for map.

There is a nominal fee of $10.00 to attend the meeting (goes to the association, not me!), or you can elect to pay $20.00 that will cover you for the entire quarter.

We’re going to talk about the basics of Section 1031 tax-deferred like-kind exchanges, plus we’ll get into some more advanced areas, too. Andrew Lietzow, Grand Pubah of the association, has specifically asked me to discuss reverse exchanges. In addition, I’m going to get out my buy-and-hold versus buy-and-exchange spreadsheet and see if I can get some input numbers from the attendees to crunch. Andrew has also asked me to consider singing my alma mater’s fight song; if I do so, it will take place at the very end of the meeting; any earlier and it would drive everyone away.

There will be take-home materials distributed, and a good time will be had by all.

Come visit, learn about tax-deferred exchanges, and see why IOWA EQUITY EXCHANGE is the company you should use for your next Section 1031 tax-deferred exchange.

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Two Rivers Real Estate Investor’s Association Meeting * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

New IRS Summary Publication on Tax-Deferred Exchanges

2008-03-10T15:51:01Z

Recently, the Internal Revenue Service put out a nice little summary of Section 1031 like-kind, tax-deferred exchanges. “FS-2008-18” (FS = Fact Sheet) does a great job of summarizing the requirements, pitfalls, and advantages of like-kind exchanges.

The article starts off by observing that generally the seller of business or investment property is liable for tax on any gain, but Section 1031 allows for an exception for those who perform a tax-deferred exchange. Further, exchanges can result in full or partial tax deferral, depending upon whether cash, relief from debt, or non-like-kind property was received in the transaction.

The article is presented in a FAQs format, answering questions such as, “Who qualifies for the Section 1031 exchange?” (Answer: Owners of investment and business property, who can be individuals, C-corps, S-corps, partnerships [general or limited], LLC’s, trusts, or any other taxpaying entity.) Also commented on is who doesn't qualify for a Section 1031 tax-deferred like-kind exchange?

The different exchange structures (simultaneous, delayed [referred to as ‘deferred’ in the publication], and reverse) are briefly explained. Also, qualifying properties are described, including the requirement that properties be of “like-kind.” A list of excluded types of properties is included (such as stocks, partnership interests, etc.).

The next question deals with the timing requirements for completing a Section 1031 tax-deferred like-kind exchange. The 45-day Identification Period and the 180-day Closing Period are briefly addressed. Other restrictions, such as who can function as a qualified intermediary, are discussed as well. A caveat to be careful in your selection of a qualified intermediary is included.

The article wraps up with a discussion of how to calculate the basis in the new property, how to report the exchange to the IRS, and the long-term impacts of exchanging. The last paragraph is another caveat to beware of individuals who promote the improper use of Section 1031 tax-deferred exchanges; for instance, the encouragement to exchange vacation or second homes that do not qualify for an exchange. (The IRS released Rev. Proc. 2008-16, published today, that sets forth specific guidelines on the exchange of vacation homes. Rev. Proc. 2008-16 makes it much clearer what can be done to qualify your property as worthy of an exchange. That procedure should be reviewed thoroughly if you are going to attempt to exchange a vacation home.)

In short, this Fact Sheet is a nice summary of exchanging as it exists in the United States today. It’s a quick read and could be of help to you in learning about Section 1031 tax-deferred like-kind exchanges. You can read it in its entirety here.

March 13, 2008 update: I now have this IRS update available in MS Word format. If you would like your own copy, please get in touch with me and I will be happy to forward it to you.

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * New IRS Summary Publication on Tax-Deferred Exchanges * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Free Spreadsheet to Learn Why Your Clients Should Consider a Tax-Deferred Exchange

2008-03-07T15:49:11Z

Do you want an easy way to learn why you and your clients should consider a Section 1031 tax-deferred exchange? Over the past few weeks, I have been fine-tuning a couple of Buy and Hold vs. Buy and Exchange Spreadsheets. I think they are finally ready for prime-time, so I want to make them available to you, my Active Rain friends. These spreadsheets compare the idea of buying property and holding it to buying the same property but using a Section 1031 tax-deferred exchange after five years to releverage the investment into more valuable property.

I think the value of these spreadsheets will be realized in two ways. First, it will help you personally understand the incredible power of Section 1031 tax-deferred exchanges. And second, it will serve as a listing tool for you when you are discussing the possibility of selling an investment property or piece of land with a prospective seller. If you can show that seller how to increase his wealth by selling today, might that put you a step ahead of the guy down the street who’s just bugging him to list his property?

I’ll spend a few minutes describing the spreadsheets below. Let me disclose two things upfront: 1) there is no charge for these spreadsheets, of course, but 2) you have to put up with my logo and contact information on them if you want them. So assuming that you don’t mind a guy doing a little advertising with a free handout, let’s delve into them…

I mentioned there are two different spreadsheets. The first is for a standard property investment such as an apartment building or single-family home. The second one is specifically set up for land investments and deals in price per acre, not overall price. Please specify which spreadsheet (or both) you would like in your request! And be sure that I have your email address to send it to you!!!

The spreadsheets are based on the idea of comparing two different scenarios: 1) Buy a property and hold it for ten years, and 2) Buy that same property but exchange out of it after five years and see what happens in another five years. The comparison of gross equity after ten years is what we’re attempting to compare in these spreadsheets. The calculations are based upon assumptions that you make. One last comment before we get into this—when you get the spreadsheet, I promise it will be easier to understand than by reading all of this run-through below, but I felt like it was necessary to give you some idea of what was being offered.

Here is a screenshot of the assumptions required: (each one of these assumptions is made by the user; the ones shown are simply the last ones I made):

The entries in the yellow-shaded area are the assumptions you will need to make to generate a comparison. (The assumptions shown are simply the last ones I made.) Let’s discuss them one at a time

Rate of appreciation—Enter the rate you expect the particular type of property you are working with to appreciate over the next ten years. This number can be negative, but it will remain constant throughout the ten years
Interest rate on debt—What rate of interest will be paid on the debt over the next ten years. (This rate will remain constant over the ten years.)
Number of payments—Over how many months will your loans be amortized?
Purchase price—How much will you pay for this investment
Fair market value—How much is the property actually worth today? If you are buying under the market value, your investment stands a much better chance of success. The old saying applies, “You make your money when you buy,” although I prefer, “You make your money when you buy and then buy again down the road through an exchange.”
Amount of down payment—Enter your down payment, if any. You can enter zero if you are getting in with no down payment.
Percentage of sale price paid in closing costs—Now we move on to the second five years on the exchange side of the equation. What is being asked here is for you to determine what percentage of your sale price is going to go to sales costs. If you expect to sell the property and pay a real estate commission, the commission itself will be 5-7% of the sales price. Based on your experience, what will the other costs add to that percentage? In my area, 10% is a reasonable estimate. Use what you think makes sense.
Equity used as ______% down payment—When you sell after five years, we expect that you will have some money as a result of so doing. With that money, you are going to theoretically purchase a new, more valuable property (or properties). What percentage of the purchase price of the new property will your equity represent? In other words, if you will use your proceeds as a 25% down payment on the new property, enter “25.” The assumption on the screen is for a 20% down payment.

Now that the assumptions have been made and entered in the shaded area, let’s look at the comparison. The screenshot below shows the results on the Buy and Hold side based on the assumptions made above.

You can see that after ten years, the initial investment of $42,000 turned into Gross Equity of $184,170. Not bad! Let’s look at the Buy and Exchange side now:

Because I can’t get all of the Buy and Exchange side on my screen at once, you’ll have to trust me that the first four years of this side are identical to the Buy and Hold side. The fifth year is part of screenshot and you can verify for yourself that it is the same as the Buy & Hold side. What happens after the fifth year on the Buy & Exchange side is interesting, though. You can see that the Gross Equity after five years is $125,110. From that, $25,535 is deducted for costs of the sale of this property (based on the 10% assumption made), leaving $99,575 to reinvest into new property. At this point, it must be pointed out that if the investor did not use a Section 1031 exchange to reinvest into new property, a sizable portion of the $99,575 would go to capital gain taxes! Exchanging allows the investor to defer ALL of those taxes. Now, based upon the assumption that the proceeds of the sale were going to represent a 20% down payment on new property, the investor purchases a $497,873 property. This investor hasn’t gotten any dumber over the past five years, so he purchases the new property at the same proportion of Purchase Price to Fair Market Value as the first one was purchased. This means that the property he purchased for $497,873 has a Fair Market Value of $594,682. Remember, this is all based on the assumptions you make at the outset; if you don’t believe you can do as well, set the Purchase Price closer to Fair Market Value. The assumptions I’ve given you here are based on a real world deal that I am presently involved in, so it can be done! You can see that after ten years, the Buy & Exchange side realizes Gross Equity of $330,386, far in excess of the Buy & Hold side’s $184,170. This illustrates the POWER OF SECTION 1031 TAX-DEFERRED EXCHANGES!

One of the interesting things I have found by playing around with this spreadsheet is that you do not need to have all of the factors lined up in a positive way for exchanging to result in a better outcome. Try changing the Rate of Appreciation to -1.0% (negative 1.0%). The outcome is still better if you exchange after five years. (I hope you don’t expect your market to go down every year for the next ten years, by the way.) You can play around with the numbers and find scenarios where exchanging after five years doesn’t come out on top, but you have to invent some weird circumstances.

In closing, if you would like a copy of either or both of the spreadsheets, please remember to provide your email address and indicate which of the spreadsheets you would like to receive (one or both). I hope you enjoy working with them and that they result in greater equity for all!!

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Free Spreadsheet to Learn Why Your Clients Should Consider a Tax-Deferred Exchange * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Midwest Farmland Prices Increased an Average of 16% in 2007

2008-03-04T16:38:03Z

Midwest farmland prices increased an average of 16% in 2007, according to the Chicago Federal Reserve Bank’s annual survey of agricultural lenders. The 7^th Federal Reserve District that is based in Chicago consists of all of Iowa and half or more of four other states: Michigan, Wisconsin, Indiana, and Illinois.

According to the 265 surveys that were returned by agricultural bankers in this district, farmland prices during the last quarter of 2007 rose 6 percent.

Iowa farmland was consistent with that average, also rising 6% during the quarter. Iowa is divided into five areas by the Chicago Federal Reserve Bank for reporting purposes. The area encompassing most of north and west-central Iowa reported a 24 percent gain over calendar 2007. The area of western Iowa adjoining South Dakota and Nebraska, from the Minnesota border to the Missouri border, increased 20 percent over the same time frame. Rounding out the five zones are the three zones made up of south-central, eastern, and northeastern Iowa at 19 percent, 15 percent and 14 percent.

Section 1031 exchanges are slipping out of the blame for higher land values, and with good reason. Cash corn prices in December were 25 percent higher than December of 2006, and cash soybean prices showed an even greater jump at 62 percent higher. Ethanol, bio-diesel, and increased demand from China and India are the leading blame-getters these days, not tax-deferred exchanges.

Fifty-six percent of the survey respondents (remember, these are agricultural lenders) said that they expect farmland prices to continue their pace of increase into the first quarter of 2008. A scant 2 percent expect land values to decrease, and 42 percent anticipate prices to remain the same from January to March. Since we are already into March, it looks like a pretty safe bet that we are not going to see that decrease the wacky 2 percent expected.

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Midwest Farmland Prices Increased an Average of 16% in 2007 * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Guidance on the Exchange of Vacation Homes via Rev. Proc. 2008-16

2008-02-20T11:59:43Z

Guidance on the exchange of vacation homes via Revenue Procedure 2008-16 was provided recently by the Internal Revenue Service. This procedure was brought about as a result of last year’s case in Tax Court Moore v. Commissioner, (T.C. Memo 2007-134) and a subsequent report by the Treasury Inspector General for Tax Administration that called for more IRS guidance on the subject. The revenue procedure creates a Safe Harbor for these exchanges; i.e., if an exchange is conducted in compliance with the parameters set forth, it will not be challenged. It is effective for exchanges commencing on or after March 10, 2008, which is also the date the procedure will be published in Internal Revenue Bulletin 2008-10.

The purpose of this revenue procedure is to create guidelines under which the taxpayer can establish that the property in question qualifies as held for investment, not simply owned for the personal use of the taxpayer with the hope for future appreciation.

Boiled down, the revenue procedure says that in order to qualify within the safe harbor, a dwelling unit, whether it is the relinquished property or the replacement property in the exchange (or both), must be owned by the taxpayer for at least 24 months before (in the case it is relinquished property) or after (in the case it is replacement property), and within each of the two 12-month periods immediately before and/or after the exchange: 1) The taxpayer rents the property to another person at fair market rent for 14 days or more, and 2) The taxpayer uses the property for personal use not more than the greater of 14 days or 10 percent of the number of days during the 12-month period that it is rented at fair market rent.

I realize that's a little cumbersome, but when does the government make things easy to understand? How about an example to clarify things some? You’ve owned a vacation home for three years. You put it on the market and it sells. Going backward from the date of sale (which is also the date your exchange begins), you did the following: 1) During the previous 12-month period, rented the property a total of 250 days at fair market rent and used it for personal use not more than 25 days (10% of the total days it was rented), and 2) During the 12-month period prior to that, rented the property only 100 days at fair market rent and used it for personal use not more than 14 days (the maximum allowable use given the fact that you only rented it for 100 days). If you can substantiate these facts in a satisfactory manner, this property falls within the safe harbor described above.

Food for thought… you own investment property today. You exchange out of your investment property into a vacation home that you operate within the safe harbor described above for two years. You then move into the vacation home as your personal residence… and live happily ever after?

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Guidance on the Exchange of Vacation Homes via Rev. Proc. 2008-16 * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Iowa Land Investment Expo—a Most Excellent Event

2008-02-19T20:35:46Z

The first Iowa Land Investment Expo was held in West Des Moines, Iowa, last Friday, February 15, 2008, at the West Des Moines Marriott. The event brought together a diverse group of investors, farmers, exhibitors and others.

The day started off with a discussion between Don DeWaay of DeWaay Capital Management and Moe Russell of Russell Consulting Group on the future of land prices. Both were essentially bullish on the prospects of continued escalation in the value of agricultural land, although both felt that any increases will be muted somewhat in comparison with the past couple of years. Mr. DeWaay was slightly more cautious than Mr. Russell, in my opinion. He noted that there is bound to be a top somewhere. Mr. Russell pointed out that each situation must be considered on its own merits. There are good deals out there, and there are deals that the buyer should steer clear of.

As an exhibitor, I was there to meet people and establish relationships, so I was not able to attend a lot of the events. There were plenty of people milling about during the morning breakout sessions, so I manned my table throughout that time period.

Lunchtime arrived, and with it a nice meal of lasagna. (By the way, the food itself at this event was worth the $35.00 entrance fee. A nice breakfast was available, then lunch, then an afternoon cookie, followed by two drinks during the cocktail hour, at which excellent hors d’oeuvres were served. Throughout the day, water and pop were readily available. What a deal!) Ken Root (of WHO radio, the long-time blowtorch of the Midwest when it comes to farm radio) was the master of ceremonies throughout the day, and I use the term “master” in its truest sense. He kept the program on time and on point, and did it deftly and with expertise. I particularly appreciated something that happened at lunch. Outside of church and perhaps family gatherings, when is the last time you heard a prayer before a meal? Ken Root, master of ceremonies, gave praise for a great nation and its hardworking people to a silent room of 350-400 attendees, all of whom added “Amen” together at the end. I was moved.

At the lunch gathering, several speakers gave presentations. Mark Reisinger from USDA Rural Development essentially ceded his time to a last-minute special guest, Tom Dorr, Under Secretary at the U.S. Department of Agricultural Rural Development. Unfortunately, I missed most of that presentation and the one that followed, Wendy Gady of Pohaku. I made it a point to be there for Elizabeth Williams’s comments on the farm bill, which I will address in a separate post.

I did make it to one of the afternoon breakout sessions. “Estate Planning Discussion,” was run by David Albrecht and Chad Stevens, both from City State Bank, two new friends made at the expo, and Scott Simpson, attorney with Dreher, Simpson and Jensen, P.C., an old friend. This was an excellent discussion on entities, trusts, succession planning, and so forth.

The final group session dealt with a little more crystal-ball-gazing about land values. Discussions were held about world grain supplies and their impact on land values in the Midwest. With China and India’s peoples moving more and more toward middle-class lifestyles, the continued strain on land for more and more production bodes well for sustaining and increasing value of that land. Mike Walsten of LandOwner Newsletter (another new friend from this event) gave a great overview of recent land sales in the Midwest (including a sale in northwest Iowa of agricultural land for almost $9,000 per acre). If you are interested in monitoring land values, Mike publishes a fantastic newsletter that comes out twice per month at the bargain basement price of $119.00 per year. You can contact him at mwalsten@profarmer.com. Mike Duffy, the venerable gentleman Professor of Economics at Iowa State University, rounded out the day with some brief comments, most of which were again bullish on the future of land values.

All in all, this was one fantastic event. It was wonderful to be a small part of it as an exhibitor. I met lots of great folks there and can hardly wait until the next one. Salutations to Peoples Company and Steve Bruere for organizing this day!

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Iowa Land Investment Expo—a Most Excellent Event * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Today’s Farm Bill / Section 1031 Update

2008-02-15T20:39:50Z

Today’s Farm Bill / Section 1031 update has to do with comments made today at the Iowa Land Investment Expo by Elizabeth Williams of DTN. Her assignment, as one of the keynote speakers, was to update the attendees on the Farm Bill. I expected her to discuss subsidies, pricing issues, and so forth, hoping that she might touch on Section 1031 tax-deferred exchanges at least a little. Instead, she led off with quite a few comments about Section 1031 exchanges!

Her comments left me feeling even more unsure of the status of the like-kind definition changes contained (or not contained) in the current Farm Bill being negotiated in congress. Her first comments were that the provision seeking to reclassify subsidized land as non-like-kind to other real estate is still a part of the Senate’s version of the bill. She brought up the point that nothing is certain until the bill is signed into law by President Bush. Last, she also indicated that the administration (President Bush) supported the offensive (in my opinion) provision.

The conclusion I come to is that there is no conclusion yet. We’ll know soon, and we can cross our fingers and keep contacting our congress people in the meantime.

I hope you're not getting sick of these updates. I do them only when something happens that relates to the issue, which lately has been often.

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Today’s Farm Bill / Section 1031 Update * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Humor - Neologisms

2008-02-14T16:06:31Z

Although there is little doubt that my typical blog posting is full of humor from start to finish… I’ve never written a blog that was designed at the outset to be humorous. Okay, so that first part is a stretch...

At any rate, the Washington Post apparently periodically asks its readers to submit neologisms, which was a new word to me when I ran across it. According to dictionary.com, the definition of neologism is as follows:

a new word, meaning, usage, or phrase.
the introduction or use of new words or new senses of existing words.
a new doctrine, esp. a new interpretation of sacred writings.

In this case, readers submitted new meanings for common words. Here are some of the winners:

Coffee (n.), the person upon whom one coughs.
Flabbergasted (adj.), appalled over how much weight you have gained.
Abdicate (v.), to give up all hope of ever having a flat stomach.
Esplanade (v.), to attempt an explanation while drunk.
Negligent (adj.), describes a condition in which you absentmindedly answer the door in your nightgown.
Gargoyle (n.), olive-flavored mouthwash.
Flatulence (n.) emergency vehicle that picks you up after you are run over by a steamroller.
Balderdash (n.), a rapidly receding hairline.
Pokemon (n), a Rastafarian proctologist.
and my personal favorite:
Frisbeetarianism (n.), the belief that, when you die, your soul flies up onto the roof and gets stuck there.

I hope that warranted a chuckle or two. If you haven't gotten enough, you can find more at this site.

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Once Again on the Farm Bill

2008-02-13T15:52:40Z

One more time on the Farm Bill… I reported in my blog Would You Like Some Good News? Success Regarding Like-Kind Status in the Farm Bill on January 25, 2008, that the provision in the Senate version of the bill that had sought to re-define like-kind status as it pertains to subsidized agricultural land (see earlier blog The Next Verse… Today’s Update on the Farm Bill and others) had been pulled from the bill in conference committee. While I believe that remains true, a letter I received yesterday from Senator Charles Grassley (R-IA) raises a question or two in my mind.

In his letter, which is in response to the numerous letters and communiqués that he has received from me on the subject, Senator Grassley spends the first few paragraphs providing background on the development of the bill in the Senate. It is clear from his writing that he understands both the pros and the cons of the issue. Let me quote the end of the fourth paragraph and perhaps you will understand my confusion: “This final provision treats subsidized real estate used for farming purposes and improved real estate used for farming purposes as like kind. However, real estate that is not used for farming purposes would be disallowed like kind treatment with subsidized real estate used for farming purposes. The 2007 farm bill passed the Senate, with this provision, on December 14, 2007, by a vote of 79-14.” (Emphasis added.)

Actually, without some further perspective, you might not understand my confusion. Consider this progression of events:

12/14/07 – Farm Bill passes Senate as described above.
Mid-January – Bill goes into conference committee between the House of Representatives and the Senate to iron out differences in the two bills. (Reminder: the House version did not have the provision to redefine like-kind status.)
1/25/08 – The Federation of Exchange Accommodators (FEA, the association to which I belong) announces that Senator Max Baucus (D-MT) now opposes the provision that redefines like-kind status. The announcement from the FEA is presented as a victory.
1/28/08 – Senator Charles Grassley writes the letter that is quoted above.

While Senator Grassley’s quoted comments indicate that the provision seeking to deny like-kind status to subsidized farmland as it relates to improved property used for farming purposes has been deleted, it appears that perhaps another layer has been added: Repeating, from the letter, “real estate that is not used for farming purposes would be disallowed like kind treatment with subsidized real estate used for farming purposes.” That, in my view, is a redefinition of like-kind status.

More as it develops…

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Omaha1 Real Estate Investment Association Meeting

2008-02-13T11:33:28Z

You are invited to the Omaha1 Real Estate Investment Association meeting to be held on Monday, February 18, 2008, at the Westside Community Conference Center, 3534 South 108^th Street, Omaha, Nebraska, and beginning at 7:00 p.m.

Come hear Ken Tharp from IOWA EQUITY EXCHANGE speak on the subject of Section 1031 tax-deferred exchanges. Ken will present the basics of the Section 1031 process and get into some of the more sophisticated applications as well. Bring your questions and your particular situation. Take-home materials will be available at the meeting.

Come visit with Ken, learn about tax-deferred exchanges, and see why IOWA EQUITY EXCHANGE is the company you should use for your next Section 1031 tax-deferred exchange.

Schedule:

7:00 a.m. – 7:30 p.m. Networking

7:30 p.m. – 8:45 p.m. Meeting and Section 1031 Presentation

8:45 p.m. – 9:30 p.m. Networking

For details, contact Lyn Weight at lynweight@alltel.net.

Ken Tharp

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Omaha1 Real Estate Investment Association Meeting * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Iowa Land Investment Expo

2008-02-13T10:56:39Z

The first Iowa Land Investment Expo will be held in Des Moines, Iowa, this Friday, February 15, 2008, at the West Des Moines Marriott, 1250 Jordan Creek Parkway, West Des Moines, Iowa.

IOWA EQUITY EXCHANGE is pleased to be an Exhibitor at this great event. Ken Tharp will be present all day to answer your questions about Section 1031 tax-deferred exchanges and how they might be utilized in your situation. Take-home materials will be available, and there will even be a drawing at the IOWA EQUITY EXCHANGE booth at the end of the day for a $50.00 gift certificate to Fire Creek Restaurant.

Come visit with Ken and see why IOWA EQUITY EXCHANGE is the company you should use for your next Section 1031 tax-deferred exchange.

Schedule:

7:30 a.m. to 8:00 a.m. Registration/Exhibitor Session

8:00 a.m. – 10:00 a.m.General Session
Introductions – Ken Root, WHO Radio
Financial Update – Don DeWaay, DeWaay Capital Management
Attaining New Yield Plateaus – Scott Jungman and Dr. David Bubeck, Pioneer
Land as a Diversification Tool – Moe Russell, Russell Consulting Group

10:00 a.m. – 10:30 a.m. Coffee Break/Exhibitor Session

10:30 a.m. – 11:15 a.m. Breakout Sessions (4 choices)

11:15 a.m. – 1:45 a.m. Lunch and Keynotes
Opportunities in Rural Iowa – Mark Reisinger, USDA Rural Development
Special Guest – Tom Dorr, Under Secretary U.S Department of Agriculture Rural Development
Demographics in Agriculture – Wendy Gady, Pohaku
Farm Bill Update – Elizabeth Williams, DTN

1:45 a.m. – 2:00 p.m. Afternoon Break/Exhibitor Session

2:00 p.m. – 2:45 p.m. Breakout Session (4 choices)

2:45 p.m. – 3:00 p.m. Afternoon Break/Exhibitor Session

3:00 p.m. – 4:45 p.m. General Sessions
Iowa Agriculture, What’s Next? – Craig Lang, Iowa Farm Bureau Federation
World Grain Supplies – Virgil Robinson, Pioneer
Land Value Trends – Mike Walsten, LandOwner Newsletter
Land Value Discussion – Mike Duffy, Iowa State University

4:45 p.m. – 6:00 p.m. Social /Cocktail Hour

Cost to attend is $35.00. Please call 515-961-0247 for registration information.

Ken Tharp

INTEGRITY. PRECISION. SECURITY.