TEE-Shots Newsletter

Mon
18
Aug

Your attorney as intermediary...?

"My attorney says that he can be my intermediary. He'll have one of his partners handle my exchange. Is this okay?"

No. Section 1031 prohibits an attorney, or their firm, who has had a client relationship with you in the past two years from acting as your qualified intermediary.

--The Experts

Mon
04
Aug

Paying expenses with proceeds...

I just got a bill from my attorney for his work on the sale of my old property. Can the intermediary pay that from the proceeds they are holding?

Yes -- the intermediary can disburse proceeds they hold to pay bills on the old property that arise subsequent to closing of the sale. Your attorney's bill is one example. Another example might be repair costs that are agreed to at closing, although the amount of the costs are unknown at that time.

--The Experts

Mon
21
Jul

Using money from the Old Property...

Can I pull the money that I invested in my Old Property out when I sell it?

No -- not without paying tax. You must reinvest all of the cash from the sale of your Old Property in order to avoid paying tax, even if some of that cash is money that you put in. Think of it like a hard-boiled egg: the money you put in is the yellow yoke, but to get to it you have to go through the white part, and the white part is all taxable.

--The Experts

Mon
07
Jul

The Jobs & Growth Act and Sec. 1031...

How does the Jobs & Growth Tax Relief Reconciliation Act of 2003 affect 1031 exchanges?

Mon
23
Jun

Buying down is taxable...

If I buy down, how much is taxable? Or does that screw up my exchange?

In order to not pay any tax, you must buy equal or up. If you buy down, the amount of the buy down is taxable. For example, if you sell your Old Property for $100,000 and you buy the New Property for $90,000, you will pay tax on the $10,000 buy down and the whole $10,000 will be taxable.

--The Experts

Mon
26
May

No 45-Day extensions...

How do I get an extension to my 45-day deadline?

Mon
12
May

IRS clamp-down on QIs...

The IRS's list of QIs...

Every year, the IRS considers revisions to their tax forms. Among these is Form 8824 (the form that you attach to your tax return to report your 1031 exchange).

Mon
28
Apr

Related party rules...

News Flash: IRS Gets Tough with Related Party Rules!

Two new events are confirming the IRS's determination to put teeth in their related party rules. A recent Revenue Ruling says that you can't use your qualified intermediary as a buffer between you and the related party, and soon to be released changes to Form 8824 will make you state, in black and white, that your dealings were not with a related party.

Thu
10
Apr

Loans to a Trust...

"The old property that I sold was in the name of my revocable living trust. The lender on my new property won't make a loan to the trust. Is this a problem?"

Mon
31
Mar

The intermediary Bond...

"The intermediary I use is an attorney/CPA/title company. They tell me that the bond from their other business covers their intermediary work. Is this correct?"

It might, but probably not. Ask for a copy of their bond; they should be more than happy to give it to you. Once you get the copy, review what it covers and look for wording about a 1031 exchange, or qualified intermediary, or exchange services, etc.

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