UPDATE ON EFFORTS TO PRESERVE 1031 EXCHANGES
Your Assistance is Requested
 On May 6th, the House Ways & Means Committee issued a report summarizing the comments received by the eleven Tax Reform Working Groups formed by Chairman Camp. Both the repeal and a simplification of section 1031 were mentioned. As someone who has benefitted from a section 1031 exchange or someone who has had a client that has, we urge you to send a letter supporting section 1031 to Sen. Max Baucus (D-MT), Chairman of the Senate Committee on Finance, Representative Dave Camp (R-MI), Chairman of the House Committee on Ways and Means, as well as your local Congressional leaders.
Click here to find a one page sample letter that you can forward to them. We encourage you to include something about the difference section 1031 made in your particular situation. We thank you for your support.
View the Impact of IRC �1031 on the Economy white paper published by the Federation of Exchange Accommodators (FEA), the national trade association for the 1031 exchange industry.
To discuss in more detail, please contact Margo McDonnell at [email protected] or 610.792.4880. 1031 CORP. will continue to provide updates in our newsletters.
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1031 Does More Than Defer Taxes
Many Often Overlooked Benefits 
Sure, everyone wants to reduce their tax liability and Section 1031 of the Internal Revenue Code allows you to defer the gain on the sale and subsequent acquisition of "like-kind" property held for business use or investment. Exchanges are much like a typical sale followed by a purchase but they are linked together by paperwork and completed within certain timeframes. A 1031 exchange allows you to defer the gain as long as the replacement property is held and if you eventually sell that, assuming it still qualifies, you can 1031 exchange again. While the deferral of the gain is the most commonly thought of benefit of Section 1031, it is all of the opportunities that this tax deferral opens up that are the most important benefits of exchanging.
Following are just some of the numerous benefits of exchanging:
- Time Value of the Deferral. A 1031 exchange gives you the opportunity to acquire replacement property using pre-tax dollars.
- Levering the Deferred Gain. The deferred gain can be leveraged into a significantly higher priced replacement property that will likely generate additional cash flow from Day 1 and enjoy greater long-term appreciation.
- Defers Depreciation Recapture: A 1031 exchange defers the capital gain (or a loss) as well as the depreciation recapture which is usually recaptured at 25% on real estate.
- Minimize Income Tax Paid: As the deferred gain does not increase a taxpayer's income, it could keep you out of the highest income tax bracket and capital gain rates as well as helping you avoid the new 3.8% Medicare Tax, AMT, personal exemption phase outs and the Pease limitations.
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The ABCs of 1031 Exchanges
An Alphabet Soup of Simplicity
All 1031 tax-deferred exchanges include the same essential ingredients but for those completing their first one or haven't completed one in some time, they can seem a little overwhelming. The advantage of working with an experienced qualified intermediary (QI), like 1031 CORP., is their ability to keep the exchange process simple for all parties.
Below are the ABCs of exchanging to keep in mind during your exchange:
- Like-Kind Property. The relinquished and replacement properties must be like-kind. When exchanging real estate, any type of real property qualifies provided it is help for business use or investment. When exchanging personal property assets, both properties must be within the same asset classification system or the same type of property.
- Held for Investment or Use in a Trade or Business: Personal use properties, "flips" and dealer property held for sale do not qualify.
- No Rights to Exchange Proceeds: You cannot have actual or constructive rights to the exchange proceeds which are typically held by the QI. Once funds are deposited into the exchange account, they can only be withdrawn for expenses directly related to the acquisition of the replacement property or at certain times allowed by the regulations.
Review the ABCs of 1031 |
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Trending this Month...  Nothing!
Yes, we said nothing. There is no one thing that is trending this month. We are, however, seeing a significantly greater number of investors and business owners initiating a 1031 exchange. |
Message from our President
 | | Margo McDonnell |
Dear Friends,
Despite being spring for a full month already, it is finally starting to feel like it. For those of us in the 1031 exchange industry, business is also heating up. The number of new exchanges is significantly greater than just six months ago. Obviously, a large reason is the increased capital gain tax rates and the new 3.8% Medicare Tax that is due for most sellers but as mentioned above, there are many other benefits of exchanging.
The focus of this newsletter is the result of so many past clients and their professional advisors looking for a refresher on 1031 tax-deferred exchanges. We also wanted to remind everyone the benefits an exchange offers and encourage you to at least consider whether or not a 1031 tax-deferred exchange makes sense in a particular situation. It may not but it also might make a lot of sense. Your tax advisor can help you decide.
And I urge everyone to send a letter to your Congressional leaders supporting the retention of section 1031, as is. Exchanges do a lot more than defer taxes, they create the opportunity to accomplish many short and long-term objectives for investors and business owners.
Best Regards,
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About 1031 CORP.
Serving as a nationwide qualified intermediary for 1031 tax-deferred exchanges since 1991, 1031 CORP. strives to provide a superior exchange experience for our customers and their advisors. We provide our customers with enhanced security of funds, knowledgeable exchange professionals and a commitment to keep the exchange process simple for our customers and their advisors. Every member of the exchange team is a Certified Exchange Specialist� and has the experience and expertise to facilitate even the most complex exchange transaction, including reverse, improvement and personal property exchanges. Additional information can be found at www.1031CORP.com. |
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Margo McDonnell, CES�
Certified Exchange Specialist�
President
1.800.828.1031 ext. 212
Mobile: 610.680.6896
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Sue Umstead, CES�
Certified Exchange Specialist�
Senior Vice President
1.800.828.1031 ext. 208
Mobile: 610.755.8520
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Marissa LoCascio, CES�
Certified Exchange Specialist�
Senior Exchange Officer
1.800.828.1031 ext. 210
Mobile: 610.742.4351
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Richard Heller, Esq., CCIM, CES�
Consultant
1.800.734.1031
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Bettye J. Matthews, CPA
Consultant
1.800.680.1031
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Joseph F. Szajnecki, CES�
Consultant
1.800.734.1031 |
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