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qi: 1031 EXCHANGES MAY BENEFIT INVESTORS FACING FORECLOSURE - 06/26/08 06:32 PM
I know it sounds weird but it could help an investor in a very specific set of circumstances.
In the last post we examined the options available for taxpayers who had debt forgiven or canceled on their principal residence. But what about those who own investment property who are facing a short sale or foreclosure? Are there tax consequences when debt is forgiven or canceled on those types of properties? You bet!
Given the challenging conditions in the real estate market, some taxpayers may be faced with the prospect of foreclosure or a short sale arrangement with their lender. Taxpayers … (8 comments)
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qi: 1031 Exchanges -- An Exchange May Still Be Necessary, Even in a Declining Market - 06/11/08 04:35 PM
There May Still Be Capital Gain Even If they Are Selling for Less than What They Paid to Purchase It!!!
You ask, "How can that possibly be?"
Well, remember that when a taxpayer engages in a 1031 Tax Deferred Exchange (selling investment property and exchanging into a new investment property) they are DEFERRING the capital gain tax that would normally be recognized on the sale.
What does Deferral mean?
It means that the basis of the Replacement Property is reduced by the amount of Capital Gain that was deferred on the sale of the Relinquished Property resulting in a … (4 comments)
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qi: 1031 Exchanges - Why Investors May Still Need to Exchange in A Declining Market. - 06/11/08 02:33 PM
There May Still Be Capital Gain Even If they Are Selling for Less than What They Paid to Purchase It!!!
You ask, "How can that possibly be?"
Well, remember that when a taxpayer engages in a 1031 Tax Deferred Exchange (selling investment property and exchanging into a new investment property) they are DEFERRING the capital gain tax that would normally be recognized on the sale.
What does Deferral mean?
It means that the basis of the Replacement Property is reduced by the amount of Capital Gain that was deferred on the sale of the Relinquished Property resulting in a … (6 comments)
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qi: Has Your Phone Stopped Ringing?? Telephone Series (Part 1) - 05/19/08 05:34 PM
It Might Not Be the Market. . .
Has your phone gone from this. . .
to this . . .
Are you blaming it on the market? Are you sure it's the market and NOT your telephone policy?
Don't miss Part 2 in the series.
Clients and Agents Biggest Pet Peeve . . .
Is the failure to receive a timely return phone call. Attorneys, CPAs and real estate agents run a tie with being the worst at returning phone calls. Have you ever been frustrated because another professional does not return your phone call? Are you ever … (6 comments)
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qi: 1031 Exchanges - Thinking About Investing In Real Estate With Other People? Read this First! - 05/16/08 02:27 PM
Partnerships V. Co-Ownership
Many investors consider asking other investors to join them in the purchase of an investment property. This arrangement can be very beneficial because it gives the parties the opportunity to invest in property they may not have been able to afford on their own and it spreads the risks and costs out.
They are a couple things to consider when contemplating a co-investing arrangement. Are you going to be a true partnership or are you going to be co-owners. This seems like a relatively minor distinction until you look at the big picture.
Partnerships
Remember, that partners … (10 comments)
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qi: 1031 Exchanges - Can You Convert A Rental Into A Residence? - 05/16/08 12:59 AM
"MANY TAXPAYERS CAN TAKE ADVANTAGE OF TWO TAX CODE SECTIONS"
After the Q & A, I thought I write a summary of the current state of rentals and residences and converting them. Here are some of the issues to review with the tax advisor when considering converting an investment property to a primary residence. It's very important to review these issues, especially, if the property was purchased as replacement property in a 1031 exchange. Click here for a real life question and answer regarding converting a rental to a residence.
… (8 comments)
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qi: 1031 Exhanges - REAL LIFE Q & A - RE: How Long Before I Can Move In? - 05/16/08 12:48 AM
REAL LIFE QUESTION AND ANSWERS
Today, I received a question from a reader of my blog. It is a very common question, so I thought I'd give you both the actual question and my answer. All identifying information has been removed. Click here for more formal information regarding converting a rental to a residence.
Dear Lisa:
After reading your column a question has come up no one seems to know the answer to.
We made a 1031 exchange from rental for rental . do you know how long we must rent it out for before we can move into it as … (0 comments)
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qi: 1031 Exchanges - Earthquake Preparedness - 05/10/08 11:05 PM
U.S. Geological Service Issues Report on California
They reported that there is a 99% chance that California will experience a 6.0+ earthquake in the next 30 years. Southern California's has a slightly higher chance for a large scale earthquake than northern California.
What that means is that every family needs to have a "plan." That plan should include contingencies for communicating their status (arrange for someone out of state to be your contact person). It's critical that each person have an emergency kit in their car that includes comfortable walking shoes, water, flashlight, batteries,thermal blanket, jacket, first aid kit and snacks that … (2 comments)
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qi: 1031 Exchanges - LLCs & Partnerships - 05/10/08 10:41 PM
It's Important Who Drafts the Operating Agreement and Partnership Agreement
Recently, I was called by a former client who was concerned because he was the managing member of an LLC that had done a multiple property exchange. One of the other members, an attorney, had drafted the LLC's Operating Agreement (the document the defines the repsonsibilities of the members and who has the authority to bind the LLC). The attorney member had purchased authorized the release of funds for the purchase of Property A (the managing member was not aware of this purchase until after it had been completed). Subsequently, the … (4 comments)
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qi: 1031 Exchanges - Don't Miss These Posts On Development Rights - 05/05/08 04:07 PM
Exchanging Development Rights
I posted these during a low traffic period this morning. I've been checking on the stats and it looks like they were largely missed. Click here for Post 1 of 2 "Definition of Development Rights" and click here for Post 2 of 2 for the "IRS's Analysis of Transferable Development Rights."
If you are working with clients who own large tracts of land, these posts will be very helpful for you.
Lisa A. Lambert, Esq. 877.646.1031 or LisaL@apiexchange.com
Asset Preservation, Inc. 800.282.1031 or info@apiexchange.com or www.apiexchange.com
… (2 comments)
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qi: 1031 Exchanges - Development Rights - Post 2 of 2 - 05/05/08 01:19 PM
How the IRS Analyzes Whether Transferable Development Rights are Like-Kind
In my previous Post 1 of 2 that addressed the definition of Transferable Development Rights ("TDR") we saw that the IRS, in a PLR* determined that they were like-kind to a fee simple. Below, we will look at the analysis and reasoning the IRS applied in coming to that conclusion.
Does the State Consider TDR to be Real Property?
In determining whether the TDRs constituted an interest in real property, the IRS noted that certain tax statutes in the state in which the TDRs were located treated TDRs as real property. "Although it is unclear … (2 comments)
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qi: 1031 Exchanges - Development Rights - Post 1 of 2 - 05/05/08 01:04 PM
Several weeks ago in my blog I discussed different types of property that may or may not qualify as like-kind including leaseholds, oil, gas and mineral rights, water rights, REITS and Timeshares, and easements. In this post we will examine the definition of development rights and in Post 2 we will examine the IRS's analysis of development rights and how they may qualify as like-kind to real property.
Definition of Development Right
A "Development Right" is defined as an unused right to develop a property to the extent permitted under state or local law. As states and municipalities have acted to restrict and regulate … (4 comments)
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qi: 1031 Exchanges - Celebrating 40,000 Points - 05/04/08 07:59 PM
New Milestone!!
With each new milestone I achieve on AR, I become more grateful for finding this unique and dynamic community. I've made friends from all over the country. People have contacted me who moved away from the Fresno area and are reconnecting with California's wonderfull Central Valley. The learning opportunities on AR abound. I feel like I've only scratched the surface of the terrific resources available.
In addition to the wonderful friends I have made, AR has provided an incredible source of business and business leads through participation.
For the newbies, it can't be stressed enough that the value you receive from AR is … (12 comments)
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qi: 1031 Exchanges - Critical Information For Agents - 05/04/08 07:38 PM
1031 tax deferred exchanges provide real estate agents with a tremendous opportunity to increase commissions! Conversely, by not understanding a few key exchange concepts, real estate agents often can unknowingly incur increased liability. I have provided answers to questions frequently asked by real estate agents. Contract law varies from state to state. It's important to know the law regarding the assignability of contracts in your state. In California, contracts are freely assignable unless there is specific language within the contract restricting its assignability.
Q: When should the Intermediary be contacted?
A: As soon as the purchase/sale contract is signed. Asset Preservation, a leading national … (2 comments)
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qi: 1031 Exchanges - La Feliz Derby Downs Fundraiser - 05/04/08 06:14 PM
Valley Children's Hospital
Yesterday, I was honored to be invited to the very exclusive La Feliz Derby Downs Fundraiser benefiting Valley Children's Hospital. It is a Kentucky Derby themed day at the Fresno County Fairgrounds. Invitees are encouraged to dress in their best "Derby Wear." They have a contest for the best hat. And, wow, were there some creative confections adorning heads at this event.
The La Feliz Guild has been devoted to raising money for Valley Children's Hospital for over 50 years. The group consists of 40 very dedicated and talented women who put on the event of the Spring season.
It was … (2 comments)
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qi: 1031 Exchanges - The Odd Ducks - Auctions, Short Sales and REOs - 05/03/08 12:59 PM
Buying an Auction, Short Sale or REO as Replacement Property
TIME SENSITIVITY OF 1031 EXCHANGES
Two of the key requirements under section 1031 are highly time sensitive.
45 Day Identification Period
After closing escrow on the Relinquished Property, the exchanger has 45 Days to Identify up to Three properties ("Three Property Rule"). After passing the 45th day those three properties are the ONLY properties that will qualify as replacement properties in that individual's 1031 exchange. There are other more complex identification rules that will not be addressed in this post, click here for more information on identification rules.
180 Day Overal Exchange Period
The 45 Day … (4 comments)
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qi: 1031 Exchanges - Structuring Reverse and Improvement Exchanges - 05/03/08 02:54 AM
"What Differentiates Asset Preservation's Format"
STRUCTURING COMPLEX EXCHANGES
A number of "Qualified Intermediary" companies offer improvement and reverse exchanges, but the structure varies from company to company. What differentiates Asset Preservation, Inc. from others?
Quite simply, Asset Preservation offers the best exchange structure and most qualified professionals to facilitate these very unique and complex exchange transactions. Asset Preservation's improvement and reverse exchange services are very different - and substantially better - than those offered by most other companies.
First, we have a Division dedicated solely to commercial exchanges and the more complex exchanges like reverse and improvement exchanges. Below is a description of what differentiates … (2 comments)
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qi: 1031 Exchange -Five Reasons To Exchange - 05/01/08 11:45 PM
"INVESTORS CAN MEET MANY OBJECTIVES UNDER IRC §1031"
Section 1031 tax deferred exchanges continue to increase in popularity as more investors nationwide discover the wide range of investment objectives that can be easily met through exchanging.
I. PRESERVATION OF EQUITY A properly structured exchange provides real estate investors with the opportunity to defer 100% of both Federal and State capital gain taxes. This essentially equals an interest-free, no-term loan on taxes due until the property is sold for cash! Most often, the capital gain taxes are deferred indefinately because many investors continue to exchange from one property to the next, dramatically increasing the … (4 comments)
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qi: 1031 Exchanges - Lending's Role In An Exchange - 05/01/08 11:44 AM
DON'T GET KICKED BY THE UGLY BOOT
Section 1031's purpose is to permit taxpayers to defer the capital gain on the sale of appreciated investment property as long as its rules are followed. One of the primary rules is that the sale property must be exchanged for property of like kind (held for productive use in a trade or business or for investment). Non like-kind property is called "Boot." There are two kinds of boot, "Cash Boot" and "Mortgage" boot.
Cash is personal property and is therefore called Cash Boot. When the taxpayer receives some of the cash in an exchange it is … (2 comments)
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qi: 1031 Exchanges - Held for Resale v. Held for Investment - 04/30/08 05:53 PM
Many investors want to know "How long do I need to hold onto property for it to qualify for 1031 treatment?" This is an area that the Treasury Regulations do not directly address. Instead, the focus is on the intent of the investor at the time of sale of the relinquished property and at the time of purchase of the replacement property.
What Section 1031 Actually Says
"No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like kind, which is to be held for productive use … (0 comments)
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Lisa Lambert, Esq. (1031 Exchange Expert)
Fresno,
CA
More about me…
The Law Offices of Elisabeth A. Lambert
Address: 1222 W. Shaw Avenue, Fresno, CA, 93711
Cell Phone: (559) 433-5399
Email Me
Discussing 1031 Exchange Issues and Related Real Estate Issues in California. Specifically focusing on the Merced, Madera, Fresno, Selma, Reedley, Oakhurst,Visalia, Hanford, Porterville and Bakersfield areas.
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