I’m proud to announce that I’ll be presenting at this weekend’s Realty411 industry event in sunny Ft. Lauderdale, FL. I’ll be discussing how TICs and DSTs can be beneficial in your next 1031 exchange, along with other important real estate investing topics. So if you’re a real estate investor already or just thinking about your first property, there will be something for you at this excellent networking event. Hope to see you in Ft. Lauderdale this Saturday, March 18, 2017!
Even before November’s surprise election results were known, real estate investors were keeping a wary eye on the future of Section 1031 of the IRS Code. The Obama administration had sought caps on transactions, and then-candidate Clinton had done the same. But it was the ultimate victor, Trump, who may have the ultimate influence on the future of this oft-used section of tax code. While no one can predict when or if section 1031 will be limited (or eliminated altogether), that isn’t stopping those involved in this sector of real estate investing from trying to read the tea leaves. This Forbes article summarizes some experts’ current thoughts.
Following the strict IRS rules governing 1031 exchanges is paramount to ensuring a successful exchange. One area where investors often trip up is in identifying potential replacement property(ies). To make sure you don’t make a misstep here and jeopardize your next exchange, we offer six helpful tips for identifying suitable replacement property in a 1031 exchange. 3 Property Rule – There are different rules that set forth how many possible replacement properties may be identified by an investor, but most follow this rule. It allows an investor to identify up to three replacement properties and eventually acquire, one, two or all three of them. 200% Rule – An investor can […]
One of the cardinal rules of any 1031 exchange is that the relinquished property and replacement property must be “like kind.” Unfortunately, when real estate is involved in the exchange, there is a fairly common issue that many investors unwittingly face – the involvement of personal property in the deal. This most commonly occurs when an asset like an apartment building (that includes household appliances such as refrigerators, washers or dryers) is exchanged for other real estate that may or may not include like-kind items of personal property. While the real estate itself (both the relinquished and replacement properties) is considered “like kind,” if one or the other does not […]
To successfully complete a 1031 exchange, you will need to avoid having actual or constructive receipt of the sale proceeds of the relinquished property during the pendency of the exchange. The way to do this is with use of a qualified intermediary. They will hold funds and title to avoid any violation of IRS rules. However, not just anyone can function as your qualified intermediary. While you might understandably turn to your own personal accountant or attorney to fulfill this role, doing so will invalidate the exchange. The IRS considers anyone who performs professional services for you within the previous 24 months as being “disqualified” to serve as the qualified […]
If you’re a lucky homeowner who has accumulated extensive appreciation in your primary home, you may be wondering how to minimize taxes when it comes time to sell. The idea of a 1031 exchange comes to mind, but then you realize that the IRS code explicitly prohibits private residences from eligibility in Section 1031. Do you have any options to avoid hefty capital gains taxes? One option is, of course, to use the 250,000/500,000 exclusion permitted by tax code on the sale of your primary residence. But that still leaves any equity above and beyond that amount (after you’ve subtracted the original purchase price and any capital improvements) exposed to […]
Now that the new administration is settled in, Washington legislators are turning their attention to one of the key issues raised during the recent campaign – tax reform. And with House Republicans already busy at work putting together their major tax reform proposal, one specific target remains in their sights – repeal of Section 1031 of the tax code. But is getting rid of 1031 exchanges the panacea that politicians believe it to be? While eliminating this part of the code would theoretically provide an immediate boost to IRS coffers – an estimated $11.7 billion from corporations and $6 billion from individual taxpayers according to a December 2015 study from […]
In the two decades I’ve been working as a qualified intermediary to assist investors with their 1031 exchanges, one question comes up more than any other at our initial meeting. Investors usually want to know whether they can pull some money out of the deal. The short answer is yes, you are absolutely free to take out cash from the deal. However, doing so comes with a caveat. You will be liable for capital gains tax on the cash you receive. Of course, even though the entire point of a 1031 exchange is to defer all capital gains taxes, that doesn’t prohibit you from choosing to incur a tax liability […]
In today’s uncertain economic times, traditional investments provide neither the stability or meaningful returns that investors seek. Perhaps that is why interest in net-leased, single-tenant real estate is skyrocketing. But for the casual investor, these properties – commonly called NNN or STNL in the industry – remain somewhat of a mystery. Before you embark on an investment of this type, it is important to understand the basics surrounding these appealing and flexible investment properties. Defining NNN Properties Typically, the types of real estate considered triple net lease investments are freestanding buildings that are leased out to national tenants on a long-term basis ranging between 10-25 years. These national tenants are […]
If you’re planning a 1031 exchange, you will likely require the services of a Qualified Intermediary. This individual is the one who keeps you on track and fulfills an indispensable role to keep you from violating the strict rules of the tax code. And while the exchange process itself is relatively straightforward (once you understand the basic rules), the QI should be doing three key things for you throughout the process. Advises on rule compliance One of the key elements of any successful exchange is ensuring that the investor meets the stringent timeframes set forth by the IRS. The first is to identify replacement property within 45 days of selling […]