iowa exchange: Quick Update on National Farmland Prices - 09/03/08 07:32 AM
About a month ago, the US Department of Agriculture published its annual report on the value of agricultural land in the United States. As you might expect, values were up nearly everywhere, but especially in the Midwest.
High prices on commodities such as corn, soybeans and wheat drove prices higher in the Northern Plains region, which encompasses states such as Kansas, the Dakotas, and Nebraska. Average farmland values increased 15.5 percent in that region, the highest increase on a percentage basis in the country.
On a per-acre basis, the most expensive farmland in the US was in Massachusetts - $12,200 per … (5 comments)

iowa exchange: What about Refinancing Before or After an Exchange? - 09/03/08 06:57 AM
The primary objective of most Section 1031 exchanges is to move an investment from one property to another without incurring a tax liability. In other words, take your money out of this property and put it into that property and pay no capital gain tax. By following the rules and regulations of Section 1031 properly, an investor can accomplish that without having a capital gain tax bill.
Occasionally someone we work with will ask a question similar to this: “How about if I refinance my property and pull cash out, then do an exchange into another property? Borrowed cash is tax-free, … (1 comments)

iowa exchange: West Central Iowa Board of Realtors Meeting - 08/22/08 07:09 AM
If you are in the western Iowa/eastern Nebraska area, please consider attending the West Central Iowa Board of Realtors meeting at 6:00 PM on Monday, September 8, 2008 at the Harlan, Iowa Golf and Country Club. The board has asked me to speak on the basics of Section 1031 exchanges. You have my promise that it won’t go on too long and I’ll cover the essentials in a no-nonsense, plain English manner. Non-members are welcome and they pay the same price as the members!
If you are interested, please get in touch with me in order to make a reservation and … (0 comments)

iowa exchange: Demystifying the Reverse Exchange - 07/24/08 04:40 AM
Reverse exchanges are gaining in popularity, but they are often misunderstood and they can be confusing. Let's investigate the basics of this exchange structure.
Sometimes a situation arises in which an investor or property owner wants to purchase a property but wishes to sell a property that he or she already owns to provide the funds needed to purchase the new property. If the old property sells prior to closing on the new property, the investor can employ a standard Section 1031 exchange to defer capital gain taxes on the sale. But what if the investor needs to close on the … (2 comments)

iowa exchange: The Farm Bill Does Not Alter the Definition of “Like-Kind” in Regards to Section 1031 Exchanges - 06/23/08 09:35 AM
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 … (6 comments)

iowa exchange: The Presidential Election and the Potential for Change in Capital Gain Rates - 06/04/08 01:07 PM
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 … (6 comments)

iowa exchange: Merely the Form of the Investment Changes… - 05/19/08 08:33 AM
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 … (0 comments)

iowa exchange: Are Your Income Properties a Business, an Investment, or Both? - 05/16/08 09:10 AM
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 … (8 comments)

iowa exchange: Section 1031 Exchanges - Tax-Deferred or Tax-Free? - 05/02/08 05:14 AM
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 … (2 comments)

iowa exchange: Iowa Landlord Association Event on 4/17/08 - 04/16/08 08:24 AM
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 UpdateTom Good, Iowa Civil Rights Commission – “Fair Housing / Discrimination”Joe Kelly, Lobbyist – Legislative Updates for 2008Gordon Kratz – “Effective Communication Techniques”Ron Bugennagen – “The GREEN rewards of Energy Efficient Rental Housing Clinic”Mark Hanson, Attorney – Legal IssuesOfficer Larry Rogers, D.M. Police … (2 comments)

iowa exchange: IRS Subtly Encourages Compliance – An Example - 04/06/08 11:35 AM
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” … (6 comments)

iowa exchange: Ways to Increase Your Return on Equity - 04/04/08 09:48 AM
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 … (0 comments)

iowa exchange: Return on Equity - 04/03/08 10:08 AM
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 … (0 comments)

iowa exchange: Omaha Landlord Association Event, March 29, 2008 - 03/30/08 01:33 PM
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 … (0 comments)

iowa exchange: Iowa Land Price Survey Shows 12% Rise in Six Months - 03/25/08 07:29 AM
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 … (3 comments)

iowa exchange: Two Rivers Real Estate Investor’s Association Meeting - 03/14/08 08:21 AM
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 … (4 comments)

iowa exchange: New IRS Summary Publication on Tax-Deferred Exchanges - 03/10/08 08:51 AM
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 … (2 comments)

iowa exchange: Free Spreadsheet to Learn Why Your Clients Should Consider a Tax-Deferred Exchange - 03/07/08 07:49 AM
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 … (31 comments)

iowa exchange: Midwest Farmland Prices Increased an Average of 16% in 2007 - 03/04/08 08:38 AM
Midwest farmland prices increased an average of 16% in 2007, according to the Chicago Federal Reserve Bank’s  annual survey of agricultural lenders. The 7th 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 … (7 comments)

iowa exchange: Guidance on the Exchange of Vacation Homes via Rev. Proc. 2008-16 - 02/20/08 03:59 AM
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, … (6 comments)