Articles

Mon
01
Jul

Dealer-Developer Issues Can Jeopardize Your 1031 Exchange

Submitted by Mary Lou Schwab on Mon, 07/01/2019 - 01:00

If you do a number of 1031 exchanges every year, you should be aware of the Dealer/Developer issues. To qualify for a 1031 exchange, a taxpayer must be able to prove their “intent” at the time of purchase was to hold the property for investment.

According to the I.R.S., real estate held as “stock in trade or other property primarily for sale” is excluded from the tax benefits of Section 1031. Listed here are some factors the IRS uses to determine if there was intent to hold property for investment:

• Length of Ownership The nature and purpose for buying the property.

• Consistent with Investment Activity Has the tax-payer’s investment income and expenses on tax returns been consistent with investment activity? (It’s a good idea to NOT file a Schedule C for the 1031 property, or classify it as “inventory” or “held for development.”)

Wed
05
Apr

The Wall Street Journal - REAL ESTATE FINANCE Joint Property Ownership Picks Up

Submitted by Gary Gorman on Wed, 04/05/2006 - 01:00

 

Tenant-in-Common Deals Allow Buyers to Chip In On Commercial Properties

-By Jennifer S. Forsyth

 

Cathy Scullin was in a pickle.

Enticed by high prices, the Beverly Hills, Calif., commercial real-estate broker began selling off pieces of her small southern California real-estate portfolio about two years ago. Only then did she realize she couldn't use the profit to buy another property.

"Everything I found needed an enormous amount of work and, in my opinion, was way overpriced," says Ms. Scullin. If she didn't reinvest in real estate quickly, she would have to pay capital gains taxes on the proceeds.

Her solution: a Tenant-in-Common transaction, where she joined a group of investors who each bought a fractional share of investment property--in this case a small retail center.

Fri
10
Apr

§1031 & Corona Virus Update

Submitted by The Experts Team on Fri, 04/10/2020 - 14:32

Happy Good Friday 1031 Clients and Friends! I hope this email finds you well.

Good news: the IRS has granted extensions for 1031 Investors who have like-kind exchange deadlines between April 1, 2020 and July 15, 2020. The IRS issued new guidance on April 9, 2020 that granted all taxpayers, including “trusts, estates, corporations and other non-corporate tax filers” a filing extension until July 15. Notice 2020-23: https://www.irs.gov/pub/irs-drop/n-20-23.pdf is an update to Notice 2020-18.  The new Notice 2020-23 doesn't address like-kind exchanges specifically, but tax experts agreed they are covered under the broadening of the extension. This give investors with a 45-Day identification deadline or a 180-Day Exchange Purchase deadline between April 1, 2020 and July 15, 2020 an automatic extension to July 15, 2020.

Sat
05
Mar

Can You Exchange the Converted?

Submitted by Curtis Moore on Sat, 03/05/2005 - 01:00

 

A NonReligious Look at 1031 Exchanges and Apartment-Condo Conversions...

Apartment-condominium conversions have become a very lucrative way to make money in real estate these days. They are very popular in resort areas as people see that individual condominiums are worth more as separate units as compared to a single apartment building for rent. In addition, investors and developers are converting office buildings for rent into office condominiums for similar reasons. However, a question we are frequently asked by our clients is whether such a conversion will qualify for a 1031 exchange. The short answer is "maybe," as long as they are structured properly

Wed
05
Oct

More Partnership and LLC Issues In 1031 Exchanges

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

One of the requirements of a 1031 exchange is that the entity that sells the Old Property must be the same entity that acquires the New Property. Where the property is owned by a partnership or a limited liability corporation (LLC) with multiple partners, the partnership or LLC is viewed as the exchanging entity.

Sun
01
Aug

Six things you need to know about §1031 - Part 6 Equal-or-Up Rule

Submitted by Gary Gorman on Sun, 08/01/2004 - 01:00

Section 1031 allows you to roll the gain from the sale of your Old Property to the purchase of your New Property. To do this, you have to jump through certain hoops: we've written previously about how your property has to be held for investment and that it can not be held for resale. We've talked about the requirement to identify potential replacement properties for your exchange and how you have to complete a list of these potential properties within 45 days with the stipulation that what ever you purchase must be on your 45 Day List. We also talked about how your money must be held by an independent third party called a qualified intermediary and how you must make sure that the intermediary holds your money in an account separate from their other exchanges. And last month we talked about the requirement that you need to take title to the new property in the same name or entity that held title to your Old Property.

Thu
01
Jul

Six things you need to know about §1031 - Part 5 The Proper Title-Holding Rule

Submitted by Gary Gorman on Thu, 07/01/2004 - 01:00

Section 1031 allows you to roll the gain from the sale of your Old Property to the purchase of your New Property. To do this, you have to jump through certain hoops. We've talked in previous articles about how your property has to be held for investment and that it can not be held for resale.

We've also talked about the requirement to identify potential replacement properties for your exchange and how you have to complete a list of these potential properties within 45 days. We talked about the requirement that whatever you purchase must be on your 45 day list. And then last month we talked about how your money must be held by an independent third party called a Qualified Intermediary (QI) and how you must make sure that the intermediary holds your money in an account separate from other exchanges.

Tue
01
Feb

The Mystery of the 1031 Holding Period

Submitted by Curtis Moore on Tue, 02/01/2005 - 01:00

 

Is there a holding period for property involved in a 1031 Exchange?

This may be the single-most asked question we hear in the 1031 Exchange business. Exchangers have a suspicion that there’s a “holding period” requirement for exchanges – meaning, that they have to “hold” (own) a property for a certain time period before or after doing an exchange, in order to qualify. In truth, these people are both right and wrong.

They’re right in that the amount of time a property is owned – both the Old (or Relinquished) Property and the New (or Replacement) Property - is a major factor in determining whether a property qualifies for exchange.

However, they’re wrong in thinking that the issue comes down to an official time period.

Wed
15
Mar

IRS Clamps Down on Commingled Accounts in 1031 Exchanges

Submitted by Gary Gorman on Wed, 03/15/2006 - 01:00

The IRS has just released proposed regulations dealing with the treatment of interest earned by Qualified Intermediaries while they hold a client's 1031 exchange proceeds. The goal of these regulations appear to be designed to curtail the practice of holding exchange proceeds in commingled accounts.

In a 1031 exchange, you can't touch the money from the sale of your Old Property, and you are required to use a Qualified Intermediary to hold your money until you purchase your New Property. There are two ways intermediaries can hold your exchange proceeds: they can pool all of their clients' money into a single account (called a commingled account); or they can put each client's money in a separate account.

Thu
05
May

The "Year-and-a-Day" Rule: Great advice, but it's not The Law

Submitted by Curtis Moore on Thu, 05/05/2005 - 01:00

Recently we encountered a great deal of confusion concerning 1031 Exchanges and the so-called "year-and-a-day" rule. You've probably heard that you should hold both your Old and New Properties for at least a year-and-a-day prior to and after completing a 1031 Exchange -- and this remains sound advice.

However (and this is a HUGE "however") THE "YEAR-AND-A-DAY RULE IS NOT THE LAW. Nowhere in Section 1031, the regulations, tax court decisions, or any other authority will you find any mention of a "year-and-a-day" rule. The "year-and-a-day" rule is only a guideline divined from a few Tax Court decisions, a non-binding IRS ruling stating that holding property for at least two years in a particular instance was fine, and common sense considerations - for instance, long-term capital gains kick-in after holding property for a year.

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