Articles

Wed
05
Oct

Capital Gains Without Tax

Submitted by Gary Gorman on Wed, 10/05/2005 - 01:00

1031 Exchanges allow you to defer the taxes over capital gains generated on the sale of an old property to be exchanged for a new property. Sooner or later, whoever wishes to make money in the Real Estate market in the United States understands that this is a serious mechanism to consider.

Popular wisdom has many proverbs allusive to the details, in which the part that world investments transactions play can hardly be ignore. Sometimes this transactions looks like angels, sometimes like demons. In the case of Real Estate and in the context of the opportunities that real its boom presents in the South Florida area, thousands or millions of dollars can be spared.

Wed
05
May

1031 Identification Issues in a Hot Real Estate Market

Submitted by The Experts Team on Wed, 05/05/2021 - 17:57
1031 Identification Issues in a Hot Real Estate Market

Section 1031 is an IRS code that allows you to defer real estate capital gains taxes (in some cases, a lot of capital gains taxes). The rules aren't impossible to follow, but they aren't easy, either.

One of the rules that causes a lot of angst, especially in a fast-moving real estate market like we have now, is the requirement that you have forty-five days to make a list of replacement properties you might want to buy. Anything you purchase to complete your exchange must be on that property identification list. You create your identification list on a form provided by your Qualified Intermediary (the 1031 specialist the law requires to guide you through the process).

Mon
01
Aug

Handling Closing Costs in a 1031 Exchange

Submitted by Gary Gorman on Mon, 08/01/2016 - 14:21

A 1031 exchange rolls the gain from the sale of your old property over to your new property. To qualify for an exchange, both the old property you’re selling and the new property you’re buying have to be investment property, so oftentimes rental property is what’s being sold and/or bought in the exchange. When you’re dealing with investment property in a transaction, you’re effectively buying or selling two things: the property itself, and the rental business. The money you receive (if you’re selling) for these two items, or pay (if you’re buying) is handled differently for tax and 1031 exchange purposes. To get to the proper handling of each item on a settlement statement, it’s helpful if you think in terms of selling or buying the property versus buying or selling the rental business.

Wed
07
Jun

What to do when a 1031 exchange overlaps years

Submitted by Gary Gorman on Wed, 06/07/2006 - 01:00

Suppose Fred and Sue sell their bare lot on September 30, 2005 for $100,000 and buy a gorgeous red condo on February 15, 2006 for $90,000, completing their exchange. They have bought down by $10,000, and as a result they have $10,000 of proceeds left over. This money is returned to them by their intermediary after the close of their exchange. When is the $10,000 taxable? In 2005 when they sold the land? Or in 2006 when they received the check from the intermediary?

Wed
17
May

Handling Tax Basis in a 1031 Exchange

Submitted by Gary Gorman on Wed, 05/17/2006 - 01:00

One area in which we get a lot of questions, is about the handling of basis in a 1031 exchange. The questions go: “When I sell my Old Property, what happens to that basis?” “What about the depreciation I already took?” “If I fully depreciated my Old Property, will doing a 1031 exchange let me ‘freshen up’ my depreciation schedule?” “If I buy the New Property for $100,000, can I depreciate the whole $100,000?” Questions like these all relate back to what happens to the basis of the property when you do a 1031 exchange.

Wed
03
Oct

Beware more than ever about your exchange intermediary

Submitted by Gary Gorman on Wed, 10/03/2007 - 01:00

At the beginning of the year, Southwest Exchange out of Henderson, Nevada, filed for bankruptcy after losing $100 million of their clients’ money. And this spring, local intermediary IXG and its sister companies in the 1031 Tax Group went down when they were unable to account for $150 million in client funds.

Most intermediaries put all of their exchange funds into one account, called a “commingled” or a “pooled” account. For years I’ve been writing articles, warning about the potential problems inherent in commingling 1031 exchange funds. And for years I’ve been the piñata of the exchange industry. I’ve been threatened with lawsuits and have been told by other intermediaries to: 'shut up and quit needlessly scaring the public about commingled accounts...!'

Wed
10
Sep

Why do a 1031 Exchange?

Submitted by Jim Sides on Wed, 09/10/2014 - 13:24

1031 is a section of the tax code that allows you to sell your investment property (almost any property other than your personal residence), buy a new investment property and defer all of the capital gains taxes from the old property to the new one.

This does three things for you:

  1. you don't have to turn over to the government upwards of a third of everything you made on the property

  2. you now have all that extra money to spend on the new (replacement) property

  3. it may help you avoid the dreaded Alternative Minimum Tax (AMT). In short, its way of preserving your working capital as you build your real estate empire.

all the money you would have paid to the government is now available to buy a better condo...

Sun
01
Apr

A 1031 Exchange Could Save You a Ton of Tax!

Submitted by Gary Gorman on Sun, 04/01/2018 - 01:00

I'm constantly amazed at how many millions, probably billions, of dollars are paid in taxes each year by people who could avoid all of the tax on the sale of their property by taking a few simple steps. Section 1031 is such a beneficial part of the Internal Revenue Code that it’s a shame most tax and legal professionals don’t know about it. And many of those who are aware of it don’t really understand it.

Section 1031 is a code section—its law, not some theory or gimmick. It allows you to roll the gain from the sale of your “old” investment property into the purchase of your "new" investment property. In other words, you defer the gain until some point in the future when you are ready to pay the tax. And yes, there are ways that will result in you having to never pay the tax.

Tue
01
Jun

Rolling Your Condo into a New Development -- Tax Free!

Submitted by Gary Gorman on Tue, 06/01/2004 - 01:00

You own a condo in a nicely situated, but somewhat dated, building. Dave Developer comes to you and offers to buy your unit for a reasonable price. What Dave wants to do is gut the building and rebuild it into a modern condominium complex. Or maybe Dave even wants to tear down the building and build a new condominium tower.

You don't mind selling but you don't want to pay tax on the sale. What you would really like to do is buy one of the new units when he gets his development completed in a year or two. How do you do this and not pay the capital gains tax?

Probably the most common and most popular way to get to where you want to be without paying tax is to do a Section 1031 exchange. What is a 1031 exchange and how does it work?

Wed
01
Sep

IRS Approves Delaware Statutory Trusts as a 1031 Exchange Vehicle

Submitted by Gary Gorman on Wed, 09/01/2004 - 01:00

One of the basic requirements of a 1031 exchange is you must take title to the New Property in the same way you held title to your Old Property (i.e. the same tax return). For example, if you held title to your Old Property as Fred Jones, you could not take title to the New Property as Jones Investment Corporation because your Old Property was owned by your Federal 1040, whereas the Corporation files a different tax return (which will invalidate the exchange).

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