TEE-Shots Newsletter


Can I exchange a real estate contract...?

Can I exchange my real estate contract in a 1031 exchange?


Is the "Year-and-a-Day" rule The Law...?

Is the "Year-and-a-Day" rule The Law?

Recently, we encountered a great deal of confusion and consternation concerning a 1031 exchange, and the so-called "year-and-a-day" rule. You've probably heard that you should hold both your Old Property and your New Property for at least a year-and-a-day before and after a 1031 Exchange.


Why the 45-Day Rule and 180-Day Rule...?

Why is there a 45-Day and 180-Day Rule for 1031 Exchanges?

Time for some 1031 Trivia!!

As you know, when performing a Section 1031 Like-Kind Exchange, you have 45 days to identify your New Property (calculated from the date of closing on the sale of your Old Property), and 180 days to close on the purchase of your New Property.

But, why did Congress choose these particular time deadlines? Unfortunately, the answer to this question is a bit esoteric. But, here are the answers -- for what they're worth!


Is §1031 a tax "loop-hole"...?

Is §1031 a tax "loop-hole?"...?

Typically, when most people hear the term “tax loop-hole,” they think that something sneaky is going on. And, although, the “loop-hole” may technically be legal, the resulting tax treatment is not what Congress or the IRS intended.


Is a "Starker Exchange" the same as "Normal Exchange"...?

Is a "Starker Exchange" different from a regular "1031 Exchange"...?

The answer is "no" -- there is no difference between a 1031 Exchange and a Starker Exchange.

1031 Exchanges are named after the section of U.S. Tax Code that allows for tax-deferred exchanges of real estate and other assets -- I.R.C. §1031. "Starker Exchanges" are named after a court case decided in 1979 (Starker v. U.S., 602 F.2d 1341 (9th Cir. 1979)).


Exchange from Real Estate into a REIT...

This Tee-Shot stated that you absolutely CANNOT exchange out of real estate and into a REIT. This is still true, except in the following limited situation:


Intermediary Defalcations...

There have been three situations that have come to light this year involving intermediaries that have taken, or dipped into, the exchange funds they were entrusted to protect for their clients. Each of these defalcations came about because the intermediary held the exchange funds in a "commingled" account where all of the exchange funds were combined.


Tax Court Rules Vacation Home IS Investment Property...

An issue of some concern in areas, such as Colorado, with large numbers of vacation homes, is the question of whether vacation homes qualify for a 1031 exchange. Property held as a personal asset, such as the home where you live, is not investment property and therefore does not qualify for a 1031 exchange. An investment property, such as a rental, on the other hand does qualify for an exchange. So what is a vacation home -- a personal property not qualifying for an exchange, or investment property that does qualify?


Delaware Statutory Trusts...

In what was probably the most important development in the 1031 industry this year, the IRS approved Delaware Statutory Trusts as a "disregarded entity."

My prediction is that in a couple of years, as real estate investors begin to truly understand the benefits of a Delaware Trust, this will become as popular a method of holding property as LLCs are.


Can I 1031 exchange my personal residence...?

Other QI's have told me I could do an exchange on my personal residence if I keep it quiet. Is this risky?

Yes it is risky -- AND it's an unnecessary risk at that. You don't need to do a Section 1031 exchange on your primary residence to defer or eliminate taxes. If you've lived in your house for two out of the last five years, you can claim the exemption (under Section 121 IRC) on capital gains up to $250,000 for single tax filers and up to $500,000 for joint returns. And, you can take this exemption every two years!


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