1031 exchange: Hidden Dangers of Partnerships and the 1031 Exchange
- 01/13/10 06:41 AM
The Section 1031 "like-kind" exchange is a legal tool utilized by many investors to upgrade their real estate holdings while deferring taxation. Theoretically, investors can exchange properties indefinitely without incurring capital gains tax. However, complications can arise when these investments are made by partnerships. It is almost inevitable that somewhere along the process, a partner will want to "cash out" their investment. This can expose the entire partnership to substantial tax liabilities. If in order to satisfy the exiting partner, the partnership's property is sold and proceeds distributed, the remaining investors will be subject to substantial taxation on any gains. … (3 comments)
1031 exchange: 1031 Exchange Case Study Update- Oil and Gas
- 12/23/09 07:13 AM
The Benefits of Oil and Gas Royalties: In the past three months Exchange Solutions Group has been witness to a most interesting and ingenious trend. A group of savvy local real estate investors, who owned fully depreciated rental property (Adjusted Basis of practically Zero), desired to defer Capital Gains but lacked the optimism to reinvest locally in rental real estate. To solve this problem, these investors bought oil and gas royalty interests that qualify for 1031 exchange treatment (yes, royalties are "like-kind" with rental real estate). These investments were cash flow rich and chock-full of depletion (depreciation's equivalent in the mineral interest world). … (0 comments)
1031 exchange: Easy Money Can Lead to Uneasy 1031 Exchanges
- 11/23/09 02:17 AM
Do you know what a 1031 exchange is? Many investors think they have a handle on it. Unfortunately, often they know enough to appreciate the sentiment but not enough to navigate its many nuances. As investors learn the hard way, one false step can lead to millions of dollars forfeited in failed 1031 exchanges. For starters, a 1031 exchange is a transaction whereby investors are allowed to sell one property and obtain another without paying capital gains tax. But if you went on that definition alone, you would most likely find yourself in violation of the IRS code, because like … (3 comments)
1031 exchange: The 1031 Exchange in Relation to Vehicles
- 11/20/09 02:17 AM
It is widely known that 1031 exchanges apply to different property types, such as office to multifamily or even raw land to oil wells. However there is usually some uncertainty about using a 1031 exchange in the case of vehicles, such as airplanes or boats. The rule of thumb in these circumstances is that 1031 exchanges are acceptable but only within the same asset class. You can trade an airplane for another airplane but not for a boat. The reasons for exchanging vehicles are slightly less intuitive than those for exchanging real estate assets. The usual purpose behind the 1031 … (0 comments)
1031 exchange: LandAmerica Settlement Leaves Guidance on How to Handle Proceeds
- 11/13/09 07:16 AM
Imagine waking up one morning and getting a call from your bank informing you that for every dollar you had, you now have quarters. In other words, there is only 25% of your cash left. This horrible scenario is now dawning over many former LandAmerica 1031 exchange customers and they may have little choice but to accept. Close to 350 former LandAmerica customers had until November 10 to vote on a plan which would have split the proceeds of a bankruptcy ruling according to the type of 1031 exchange agreement they had in place (A U.S. trustee has filed an … (1 comments)
1031 exchange: A Credit to 1031’s: New Homeowners Get a Tax Credit Extension and Investors Get to Sell
- 11/02/09 01:52 AM
The Senate is considering a proposition that will both extend a popular tax credit for first-time home buyers past the previous Nov. 30 deadline and expand it to include certain current homeowners. This development has implications which directly affect the market for 1031 like-kind exchanges, as it will propel home purchases, allowing many investors to exchange their rental properties in a 1031 exchange. So far, ES Group has already facilitated three of these exchanges this week. The reasons for exchange have been somewhat varied. In two cases the owner simply exchanged their previous residential rental property for another, often times … (1 comments)
1031 exchange: If Capital Gains Rates Go Up, 1031 Exchanges and Net Leases Could Too
- 10/22/09 05:47 AM
If untouched, capital gains rates will automatically revert to 20% on December 31, 2010. Currently the rate stands at 15% and if the Obama Administration makes good on earlier indications, the rate could be raised even higher to 28%. With capital gains rates set to increase, it only makes sense that more people will want to defer their impending tax burdens by transferring their wealth through 1031 exchanges. Furthermore, it could be possible that the Net Lease market segment will benefit greatly from this. Net Lease Investments, which are characterized by their long term stability and hands off managerial approach … (3 comments)
1031 exchange: 1031 Reverse Exchange Insights
- 10/15/09 09:22 AM
I recently ran into a very interesting blog by Net Lease Insider on the benefits of the 1031 Reverse Exchange. They interviewed Stan Freeman, President of Exchange Strategies Corporation and he provided some useful insights: 1. You can extend the time limits of your 1031 reverse exchange above 180 days because you are dealing with multiple properties, each with their own schedule. 2. You can actually make enough money from the exchange to offset the fees for completing it. If the properties you own are both producing cash flows, you are still privy to the revenues from them while … (0 comments)
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