On May 22, 2008, Congress enacted the Food, Conservation and Energy Act of 2008 which is often referred to as the Farm Bill. Among other things, the Act amends IRC Section 1031(a)(2)(B) to exclude mutual ditch, reservoir or irrigation company stock from the definition of "stock." As a result, mutual ditch, reservoir or irrigation company stock should now be eligible in §1031 exchanges. In order to qualify for this treatment, the new law requires that ditch stock must be treated as an interest in real property under the law of the state in … (3 comments)
qualified intermediary: 1031 EXCHANGES MAY BENEFIT INVESTORS FACING FORECLOSURE
- 06/26/08 11:32 AM
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)
This issue has come up twice this week. Once on an AR blog and once in the course of my business. So here you go. . . When a client selects a Qualified Intermediary (QI, accommodator, facilitator) and decides to open an exchange account a number of contractual things need to happen before the QI is ready to accept the clients funds from the sale of the property. 1. The Seller (client/taxpayer) will sign an exchange agreement, which essentially prevents them from having the ability to pledge, borrow or otherwise receive the benefits of the sale proceeds during the exchange period … (10 comments)
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)
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)
qualified intermediary: 1031 Exchanges - Can You Convert A Rental Into A Residence?
- 05/15/08 05:59 PM
"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.
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qualified intermediary: 1031 Exchanges - Earthquake Preparedness
- 05/10/08 04:05 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)
qualified intermediary: 1031 Exchanges - LLCs & Partnerships
- 05/10/08 03:41 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)
qualified intermediary: 1031 Exchange - Like Kind Property - REWIND
- 05/06/08 07:12 AM
A Quick Review of the Most Commonly Misunderstood Aspect of 1031 Exchanges Yesterday, we examined some more advanced aspects of 1031 exchanges that addressed like kind property issues. I thought it would be helpful to do a quick review on one of the most confusing areas of 1031s. One of the most commonly misunderstood aspects of 1031 exchanges is the concept of Like Kind Property. People commonly think that if they sell a duplex only a duplex will be like kind in their exchange. That couldn't be farther from the truth. The definition under the tax code of like kind property is "property held for … (3 comments)
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)
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)
qualified intermediary: 1031 Exchanges - La Feliz Derby Downs Fundraiser
- 05/04/08 11:14 AM
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)
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)
qualified intermediary: 1031 Exchanges - Structuring Reverse and Improvement Exchanges
- 05/02/08 07:54 PM
"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)
qualified intermediary: 1031 Exchange -Five Reasons To Exchange
- 05/01/08 04:45 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)
qualified intermediary: 1031 Exchanges - STOCK MARKET PASSES 13,000 TODAY!!
- 05/01/08 10:03 AM
Stocks Rise as Dollar Advances on Optimism About US Economy It's great to finish out the day with some upbeat optimistic news!!! The Associated Press reported that the Dow rose 190 points because investors viewed the rising dollar and falling oil prices as a positive sign for the economy. Click Here for the whole article. Here are some of the factors that are being attributed to the upward move: 1. The dollar on better than expected economic data and the Fed's apparent resolve to monitor inflation. 2. Consumer spending rose .4% in March. 3. Manufacturing contracted less than expected. 4. The dollar's advance helped crude oil fall briefly near … (5 comments)
qualified intermediary: 1031 Exchanges - Lending's Role In An Exchange
- 05/01/08 04:44 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)
qualified intermediary: 1031 Exchanges - Held for Resale v. Held for Investment
- 04/30/08 10:53 AM
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)
qualified intermediary: 1031 Exchanges and The Serial Flipper
- 04/30/08 08:07 AM
To Flip or Not To Flip This post was inspired by a comment I made on JL's Blog post about flipping property as an investment strategy. As he pointed out many first time real estate investors are entering the market inspired by shows like "Flip This House." What a lot of these shows don't show is that flipping can be RISKY. . .
AND flipping can often be a gamble, akin to flipping a coin. . . As with any investment, often the greater the risk, the greater the potential pay off. . . Here are a couple of things to keep in mind if you think … (6 comments)
qualified intermediary: 1031 Exchanges - Using TIC Structure to Reduce Foreclosure Rate
- 04/29/08 11:04 AM
Company Proposing TIC Arrangements As A Foreclosure Alternative Dees Stribling of Commercial Property News reported in his article "NetLease Q & A: New TIC Structures Proposed by Prudential Rand's Rand" that Greg Rand of Prudential Rand Realty in New York is currently exploring with his clients the idea of setting up a TIC-like structure to avoid foreclosure.
Dees Stribling describes the concept and structure, "Instead of foreclosing on a residential property - anything from single-family to owner-occupied multifamily properties - a lender becomes fractional owners in the property with a borrower who can afford a reduced mortgage payment. The lender receives a piece of … (10 comments)
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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