iowa 1031: What Could Possibly Go Wrong? - 03/01/11 06:04 AM
"What could possibly go wrong" should not be the thinking of someone entering into a Section 1031 exchange! An individual who contemplates a Section 1031 exchange should question and understand what is going to happen to his or her money during the exchange.
In my opinion, the foremost obligation of the Qualified Intermediary during a Section 1031 exchange is to protect his clients' funds while the funds are in the care of the Qualified Intermediary. The client should fully understand exactly how his funds are to be held and what protections will be utilized for the protection of those funds. Liquidity … (3 comments)

iowa 1031: DIY 1031 - Not So Fast - 02/17/11 09:08 AM
Have you ever thought about trying a Section 1031 as a DIY (Do It Yourself) project? If so, you might want to think again. Read on.
A couple in Arizona tried to do it themselves and paid a steep price as a result. They sold a piece of Arizona property for $76,000, took $10,000 of that as earnest money, and the balance was placed in an escrow account with a title company. The couple made any number of mistakes as they planned their DIY exchange. Among them, they neglected to state their intentions to enter into an exchange prior to their … (0 comments)

iowa 1031: Taxes - Where Do We Stand? - 10/06/10 06:21 AM
With the US tax code comprising so many thousands of pages and only getting larger, it's getting more and more difficult to keep up on what's happening. This article is intended to be a short overview of some of the latest actions and inactions by our lawmakers. It is also intended to be strictly a recitation of the facts; no political spin or opinion included.
Most recently, the 2010 Small Business Jobs Act ("SBJA") passed the Senate (9/16/10), the House (9/23/10), and was signed into law by President Obama (9/27/10). While its name might indicate otherwise, the law impacts large businesses … (2 comments)

iowa 1031: Case Study Corner - An Exchange that Morphed into an Improvement Exchange - 07/07/10 11:04 AM
David had sold the farm that he had owned for many, many years and realized a capital gain of $800,000. With that money, he entered into a Section 1031 tax-deferred exchange with us and went out to find his new property. His intention was to find an apartment building that would provide a nice income.
What he found was a property that he could purchase for $650,000, which left him with $150,000 on which he would owe taxes to both the federal government and the state in which he lived. At that point, he considered trying to find another property such … (0 comments)

iowa 1031: Case Study Corner - Reverse Exchange Rolls into Standard Exchange - 04/12/10 09:01 AM
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)

iowa 1031: Capital Gain Tax Increases Coming - 03/22/10 06:59 AM
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)

iowa 1031: Case Study Corner - Year-End Exchanges - 02/04/10 04:01 AM

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)

iowa 1031: It's All Relative - Related Party Issues in 1031 Exchanges - 02/03/10 08:03 AM
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)

iowa 1031: IRS Audits - How to Avoid Them - 12/23/09 04:25 AM
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)

iowa 1031: Iowa Land Prices Decline; First Time in Nine Years - 12/18/09 04:29 AM
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)

iowa 1031: Section 1031 Exchanges and Conservation Easements - 10/26/09 08:14 AM
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)

iowa 1031: The Requirements for Maximum Tax Deferral - 10/26/09 05:04 AM

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)

iowa 1031: Defining the Exchange Term "Like-Kind" - 08/18/09 09:12 AM
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)

iowa 1031: Can I Use a Section 1031 Exchange to Build or Improve a Property? - 05/28/09 03:43 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)

iowa 1031: Iowa Landlord Association Spring Educational Seminar & Trade Show - 04/28/09 03:00 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)

iowa 1031: Two Rivers REIA First Annual Convention - May 9th, 2009 - 04/28/09 02:46 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)

iowa 1031: What Do I Put in My Purchase Agreement if I Want to Do a Section 1031 Exchange? - 04/10/09 08:57 AM
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)

iowa 1031: Selling, Serving and Being Serious - 03/30/09 03:42 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)

iowa 1031: Iowa Farmland Value Report - 03/12/09 09:50 AM
In a further confirmation that values have peaked at least for now, the REALTORS® Land Institute semi-annual survey shows a 7.6% drop in the price for farmland over the six months ending February 28 of this year. This survey is conducted every six months and consists of input from the state's farmland real estate community. The previous survey indicated an increase of 6.6%. The previous twelve months, therefore, show approximately a 1% drop in values.
No one is necessarily panicking about this drop or leveling off, however. According to Troy Louwagie, REALTOR® with Hertz Farm Management and also the spokesman for … (2 comments)

iowa 1031: Have Iowa Farm Land Values Peaked? - 03/06/09 08:28 AM
In what could hardly be termed a surprise, the Des Moines Register reported on February 21, 2009 that farm land values in Iowa declined 6% during the final quarter of 2008 according to the Federal Reserve Board of Chicago. This is the first such drop in a decade. The primary contrbuting factor is the sharp decline in commodity values since the summer, in many cases as much as a 50% drop.
The 6% drop in Iowa was discovered during a survey of 209 banks in the upper Midwest, including not only Iowa, but Indiana, Illinois, Wisconsin and Michigan as well. Iowa's … (2 comments)