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iowa like kind exchange: Case Study Corner - Reverse Exchange Rolls into Standard Exchange - 04/12/10 04:01 PM
Mary and Michael had an unusual situation. They had a firm contract to sell their farm that was set to close on September 17 (we'll call this transaction "S17"), but they were also under contract to buy a farm with that closing set for July 26 ("J26"). A pretty clear-cut reverse exchange situation, but there was a wrinkle.
The price of S17, the farm they were selling, was $1.6 million, and the agreement on J26, the one they were buying, was only $700,000. They fully intended to purchase additional property to use up the remainder of the $1.6 million they would … (0 comments)
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iowa like kind exchange: Capital Gain Tax Increases Coming - 03/22/10 01:59 PM
Look out ahead, folks! Regardless of what you think of the health care "reform" that passed the House of Representatives yesterday (and I guess the quotes make it clear what I think of it), it will have a huge impact on those of us who call ourselves investors.
Within the thousands of pages of legislation, there is a small provision with a significant effect. It is a 3.8% "Medicare payroll tax" on capital gains and other investments. This increases the capital gain rate from its present 15% to 18.8%. **Please see 4/8/10 update at bottom.** Bad, but perhaps tolerable, you may … (0 comments)
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iowa like kind exchange: Case Study Corner - Year-End Exchanges - 02/04/10 12:01 PM
This is the first in a planned series of case studies, where we take a look at specific exchange issues relative to a specific client. No real names, no real locations, no real property descriptions, but some good general knowledge. Hope you enjoy this new feature.
Joe called in the late fall of 2008. He was considering an exchange involving property he owned in Iowa. His concern was that he might not be able to find the specific type of replacement property he wanted. He was willing to take the hit from capital gain taxes if he couldn't find the … (0 comments)
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iowa like kind exchange: It's All Relative - Related Party Issues in 1031 Exchanges - 02/03/10 04:03 PM
When it comes to related party issues, Section 1031 exchanges are no different than most of tax law - fraught with peril and rather confusing. Let's try to make some sense of it, shall we?
The crux of the matter when it comes to related party matter and 1031 exchanges is that the IRS is not a big fan of using a relative to establish a higher basis in a low basis property through an exchange. That is known as basis shifting, or basis swapping, and it is highly frowned upon. And they've taken steps to ferret out abusers - Form … (0 comments)
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iowa like kind exchange: IRS Audits - How to Avoid Them - 12/23/09 12:25 PM
According to the Associated Press, the best way to avoid an IRS audit is to earn less than $200,000. Tax returns showing less than $200,000 go unaudited 99 percent of the time, according to the AP report.
For those with income above $200,000, there is a 3 percent chance of audit. Earnings of $1 million or more are audited 6 percent of the time. These percentages apply to both single filers and joint returns.
Another bonus for those under $200,000 in adjusted gross income is that the number of audits for that category remained constant from 2008 to 2009. On the other … (0 comments)
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iowa like kind exchange: Iowa Land Prices Decline; First Time in Nine Years - 12/18/09 12:29 PM
Iowa State University economist Michael Duffy reports that average farmland prices dipped 2% over the course of 2009, the first decline since 1999. The primary culprit for the decrease was a drop in corn, soybean and livestock prices, according to Duffy. The average value of an acre of Iowa farmland decreased to $4,371 during 2009 from $4,468 in 2008.
During the near-decade of land value increases, the average value of an acre of farmland rose 145 percent. (See chart from the Des Moines Register below.)
Although the average price of farmland did decrease during 2009, not all areas of the state … (0 comments)
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iowa like kind exchange: Section 1031 Exchanges and Conservation Easements - 10/26/09 03:14 PM
Did you know that if you own land and sell an easement to that land to a government agency, it is likely that your transaction is eligible for Section 1031 exchange treatment?
Emergency Watershed Protection Program (EWPP) and Wetlands Reserve Program (WRP) easements are being purchased by the Iowa Department of Natural Resources and similar agencies in other states. While the owners of the land retain title to the residual value of their land after the easement is recorded, the sale of the rights to this easement can be exchanged for other real property. This is an excellent means to acquire … (1 comments)
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iowa like kind exchange: The Requirements for Maximum Tax Deferral - 10/26/09 12:04 PM
You'd think it would be fairly simple to list the requirements to defer the maximum amount of capital gain taxes through the use of a Section 1031 exchange. As I set out to write this article, though, I realize that like a lot of other aspects of exchanges, it takes a little thought and effort to describe things accurately.
One-hundred percent deferral of all capital gain taxes is pretty difficult to achieve, but we can all get close to 100% if we watch things closely. The two primary requirements for maximum deferral are these:
1. Buy property with value equal … (2 comments)
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iowa like kind exchange: Defining the Exchange Term "Like-Kind" - 08/18/09 04:12 PM
Many people hear the term "like-kind" when they're talking about Section 1031 exchanges and they start to panic. Please, relax! I've got an easy way for you to figure out whether two properties are like-kind to each other for purposes of exchanging.
First of all, a caveat... the easy way only applies to real estate exchanges. I'll talk more about other types of exchanges later, but suffice it to say that it is more difficult to determine like-kind status in those exchanges. With real estate, however, it's pretty simple. I've heard other exchange people say, "All real estate is like-kind … (1 comments)
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iowa like kind exchange: Can I Use a Section 1031 Exchange to Build or Improve a Property? - 05/28/09 10:43 AM
Occasionally a client will ask that question, and we can usually answer, "YES!" It does depend upon exactly what the client's plans and intentions are, but in general, the replacement property in a Section 1031 exchange can be newly constructed during the exchange or substantially improved during the exchange. Here are the details:
Let's assume that an exchanger has sold his relinquished property and plans to construct a new duplex on a lot that he intends to purchase through his 1031 exchange. A key thing to remember is that once the exchanger takes title to the replacement property, any funds remaining … (2 comments)
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iowa like kind exchange: Iowa Landlord Association Spring Educational Seminar & Trade Show - 04/28/09 10:00 AM
Short notice, but I wanted to announce the Spring Educational Seminar and Trade Show of the Iowa Landlord Association. It will take place on Thursday, April 30, at the downtown Holiday Inn. There will be a succession of speakers on relevant topics to landlords. During breaks, please stop in at the vendor trade show and be sure to stop at the Iowa Equity Exchange booth to say hello. We will be there with our display and information to help Iowa investors with their Section 1031 exchanges.
You can find out more about the Iowa Landlord Association at http://www.iowalandlord.org/public/home.asp, including contact information … (0 comments)
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iowa like kind exchange: Two Rivers REIA First Annual Convention - May 9th, 2009 - 04/28/09 09:46 AM
Announcing the first annual convention of the Two Rivers Real Estate Investors Association, to be held on May 9, 2009, at the Des Moines Holiday Inn Airport Conference Center. Two nationally-recognized speakers will be making presentations to the group: Larry Goins, of South Carolina, and Pete Youngs, of Georgia. Larry's talk on wholesaling is titled "The Ultimate Buying/Selling Machine." Pete will present a detailed description of rehabbing for profits. Details and registration information is available at http://www.tworiversreia.org/Convention_Registration.html
This event promises to be a fantastic opportunity to network with fellow investors and hear a couple of the top national speakers on … (0 comments)
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iowa like kind exchange: What Do I Put in My Purchase Agreement if I Want to Do a Section 1031 Exchange? - 04/10/09 03:57 PM
One of the most common questions we receive is something along the lines of "What do I put in my Purchase Agreement if I want to do a Section 1031 exchange?" The answer can sometimes be, "Nothing," although we do suggest that you use what is known as a cooperation clause. By law, there is no requirement for the cooperation clause. What is required, however, is that the contract be assignable, or in most states, that there be no restriction on the contract's assignability. In other words, your purchase agreement should not have language that says "This contract may not be … (2 comments)
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iowa like kind exchange: Selling, Serving and Being Serious - 03/30/09 10:42 AM
This will be a first... I'm going to give you an inside look at what it is we are trying to do here at Iowa Equity Exchange. First of all, props to Jeffrey Gitomer for a column on this topic that prompted me to devote detailed thought to these things. Let's start out with a definition.
When you think of someone who is "serious," does that conjure up the image of a staid, stoic individual, boring and stiff? In business, that's just not the case. The actions that are taken by a business build its image. If your business shows a … (0 comments)
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iowa like kind exchange: Apartment Sales Report - Des Moines, Iowa - 01/27/09 04:30 PM
I hate negative news. But facts is facts. When it comes to the sale of apartment properties in the Des Moines market, there's not a lot of positive news right now. If you only want positive news, skip to the last paragraph and I'll give you the best spin I can come up with.
According to Rick Krause, Senior Associate with CBRE Richard Ellis/Hubbell Commercial, sales transactions involving apartment buildings in Polk County were down 48% in 2008 compared to 2007. Dollar volume was down an even higher percentage: 62%. This information comes from Rick's self-published monthly newsletter, the Central Iowa Income … (2 comments)
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iowa like kind exchange: Liquidity of funds - doesn't sound exciting? Read on... - 01/22/09 12:41 PM
What could be more exciting than a discussion of the liquidity of funds, right? Okay, so it sounds pretty dry. Let me try to explain why it's actually of critical importance.
In my opinion, the cornerstone responsibility that a Qualified Intermediary has to his client is to protect the client's money while it's in the QI's possession. If the QI does something that makes it so his client's money isn't available when it's needed, or isn't worth as much as it was when it was transferred to the QI, then it really doesn't matter how well the QI prepared the documents, … (0 comments)
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iowa like kind exchange: Section 1031 Exchanges and the Auction Industry (Part 3) - 01/14/09 01:57 PM
In the summer of 2008, I was honored to be asked to author an article for The Auctioneer, the official publication of the National Auctioneers Association, on the subject of Section 1031 exchanges and their application within the auction industry. The article was published in the September 2008 issue. If you would like to access the article online, it can be found on pages 62-64 of this link: The Auctioneer. The article is reprinted in three blog entries; this is the third of the three. (Part 1 can be found here; Part 2 here.)
What is the difference between the exchange … (3 comments)
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iowa like kind exchange: Section 1031 Exchanges and the Auction Industry (Part 2) - 01/14/09 01:34 PM
In the summer of 2008, I was honored to be asked to author an article for The Auctioneer, the official publication of the National Auctioneers Association, on the subject of Section 1031 exchanges and their application within the auction industry. The article was published in the September 2008 issue. If you would like to access the article online, it can be found on pages 62-64 of this link: The Auctioneer. The article is reprinted in three blog entries; this is the second of the three. (Part 1 can be found here.)
Specific questions about exchanges and auctions:
When should I … (0 comments)
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iowa like kind exchange: Section 1031 Exchanges and the Auction Industry (Part 1) - 01/14/09 01:07 PM
In the summer of 2008, I was honored to be asked to author an article for The Auctioneer, the official publication of the National Auctioneers Association, on the subject of Section 1031 exchanges and their application within the auction industry. The article was published in the September 2008 issue. If you would like to access the article online, it can be found on pages 62-64 of this link: The Auctioneer. The article is reprinted in three blog entries; this is the first of the three:
The purpose of this article is to provide basic information about Section 1031 exchanges and … (0 comments)
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iowa like kind exchange: Section 1031 Exchanges - The Basics (Article #3) - 01/14/09 12:19 PM
This is the third of three blog entries about the basics of Section 1031 exchanges. The first entry can be found here, Article #1, and the second entry is here: Article #2.
Quick review... the first hurdle for the standard exchange is that the properties must qualify. Second, you must establish your intent to exchange in writing prior to closing of the property you are relinquishing. Third, you must identify the property you intend to purchase using the guidelines allowed. Moving on to the final requirement...
#4 - Acquire the replacement property. Again going back to the date of closing of … (0 comments)
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Ken Tharp - Section 1031 Exchanges, Iowa/U.S.
West Des Moines,
IA
More about me…
Iowa Equity Exchange
Address: Des Moines, Iowa, Nebraska, Kansas, Oklahoma, Missouri, South Dakota, North Dakota, Minnesota, Wisconsin, Illinois, Indiana
Office Phone: (800) 805-1031
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