I recently saw an article that caused me angst. It is included at the end of this newsletter. The 1031 tax deferred exchange which defers (not eliminates) payment of capital gains and recapture tax on the sale of property is under assault again. This section of the tax code has been there for the past 100 years, according to the author. This provision is a mainstay of our commercial real estate practice. It creates liquidity throughout the real estate investment market, which provides incentives and support for real estate to achieve its highest and best use (that’s a good thing). Now I don’t want to go all political ballistic on you but recently Joe Biden, candidate for President, announced a plan that would eliminate certain preferences in the tax code for real estate, one of which is the Section 1031 Like Kind Exchanges. This would devastate our economy and hurt the very people he is trying to help with this proposal. Please let your members of Congress know that the 1031 Like Kind Exchange is important to you and our American economy. I suggest you read the whole article later in this newsletter.
Featured Listings Available Now
1013 Tamarac Dr.
Carpentersville, IL 60110

Carpentersville - 16,582 SF per-engineered steel building on .66 acre with 14-16' ceilings, 26% office, covered dock and DID, sprinklered, new $38,000 roof.

Brokers: Bruce Kaplan & Kevin Kaplan
907 Front St.
McHenry, IL 60050

McHenry - 12,120 SF commercial building on Rt 31 on 1.14 acres. Front office/sales/show room area and rear warehouse with 6 DIDs and a huge rear parking. Newer roof and HVAC.

Brokers: Bruce Kaplan & Kevin Kaplan
371 Prairie St.
Crystal Lake, IL 60014

Crystal Lake - 2 Condos, 2,274 and 4,626 SF dock and about 25% office. Additional 1.43 acres available for outdoor storage ($99,900). Units are $193,000 and $393,210 respectively.

Broker: Heather Schweitzer
1125 Mitchell Ct.
Crystal Lake, IL 60014

Crystal Lake - 15,400 SF single story masonry office building on 1.4 acres, built in 2006. Divisible to 2,500 SF.

Broker: Mike Deacon
600 Spring Hill Ring Rd.
West Dundee, IL 60118

West Dundee - 120 - 1,121 SF office suites near Spring Hill Mall. Rent includes CAM, taxes, utilities, and wifi. Common bathroom, kitchen, and mail room with copier.

Brokers: Sharon Glasshof & Kevin Kaplan
Sold, Leased, and Under Contract
11253-11299 Kiley Dr.
Huntley, IL 60142

Bruce Kaplan & Kevin Kaplan
1333 Timber Dr.
Elgin, IL 60123

Sharon Glasshof
456 Dartmoor Dr.
Crystal Lake, IL 60014

Heather Schweitzer
691 Lake Ave.
Woodstock, IL 60098

Bruce Kaplan & Kevin Kaplan
77 E. Crystal Lake Ave.
Crystal Lake, IL 60014

Bruce Kaplan & Kevin Kaplan

Featured Articles
By Dan Wagner, Senior Vice President Government Relations
The Inland Real Estate Group of Companies, Inc.
Internal Revenue Code Section 1031, which allows taxpayers to defer, not eliminate, payment of capital gains and recapture tax on the sale of property, has been in the Federal tax code for the past 100 years. There have been numerous proposals from elected officials to remove Sec. 1031 in order to allegedly “close a tax loophole” or pay for another government program. In each instance, this battle tested provision of the tax code passed the challenge of scrutiny, but only after lawmakers took the time to understand how Sec. 1031 impacts liquidity throughout the real estate market, revenue implications to Treasury as a result of a slowdown in transaction volume, and its general impact on the US economy as a whole.
Recently, Candidate Joe Biden announced his idea to create a $775 billion “caring economy” plan that seeks to support care for children and the elderly by raising taxes on real estate investors.  While the intentions behind the plan are admirable, the means through which his campaign intends to finance this initiative are grossly misguided and need to be reconsidered. Mr. Biden’s campaign plan is to eliminate certain preferences for real estate, and one major area in which the plan is intended to include is the elimination of Sec. 1031 Like Kind Exchanges. The elimination of this tax provision which has driven the buying and selling of investment property for the past century, would be devastating to our economy and would ultimately hurt the very people he is trying to help with his proposal.

There were discussions about eliminating Sec. 1031 Exchanges (for real estate transactions) when the Tax Cuts and Jobs Act of 2017 was passed as well. However, when our elected officials were presented with two separate impact studies by Ling & Petrova and Ernst & Young LLP, each of which delineate the financial effect of limiting or elimination of Sec. 1031, the numbers articulated what pages of political soundbites might not have. Elected officials quickly came to the realization that not only was the cost of like-kind exchanges to the Treasury grossly overstated, but that an outright repeal would devastate several important industries, harm the economy as a whole, and in the end cost the government in the long run.
Both the Ling & Petrova and Ernst and Young studies address how Sec. 1031 creates liquidity throughout the real estate investment market, which provides incentives and support for real estate to achieve its highest and best use. The transactional activity from trading out of yesterday’s real estate to a new piece of real estate to meet tomorrow’s needs is a catalyst for a stream of economic activity, creating jobs and taxable revenue for realtors, qualified intermediaries, title companies, escrow, insurers, lenders, contractors, inspectors, appraisers, building supply vendors, etc.. and generates revenue for local and state governments through transfer taxes, permitting fees, and increased tax basis from upgraded buildings and improved communities.
Key Findings from Ling & Petrova Study:
-Like-Kind Exchanges Encourage Investment: On average, taxpayers using a like-kind exchange acquire replacement property that is approximately 33 percent more valuable than the relinquished property.
-Like-Kind exchanges provide only temporary tax deferral: The overwhelming majority- 88 percent of real estate replacement properties acquired through a like-kind exchange are disposed through taxable sales, not subsequent like-kind exchanges.
-Like-Kind Exchanges lead to job creation: Real Estate acquired through a like-kind exchange is associated with greater investment in capital expenditures (i.e., job-creating property upgrades and improvements) than real estate acquired without the use of like-kind exchanges.
Key Findings from Ernst and Young Study:
-Repeal of 1031 would subject businesses to a higher tax burden on their transactions, resulting in a longer holding periods (the “lock-in” effect)
-Repealing 1031 rules would slow economic growth, shrink investment and ultimately reduce gross domestic product
-The study concludes that repeal of the 1031 would adversely impact the U.S. economy by discouraging investment, causing a reduction in GDP, a contraction in the economy, and would unfairly burden certain industries and taxpayers.
In addition to these studies, it is an empirical fact that Sec. 1031 stimulates America’s vital agricultural sector. Farmers and ranchers use Sec. 1031 to combine acreage or acquire higher grade land or otherwise improve the quality of their operations. Retiring farmers can exchange their most valuable asset, their farm or ranch, for other real estate without diminishing the value of their life savings.
Sec. 1031 is also used to promote conservation and environmental policies. Grants of conservation easements can be structured as tax-deferred exchanges, facilitating government and privately funded programs designed to improve water quality, reduce soil erosion, maintain wetlands and sustain critical wildlife habitat. These exchanges also enable landowners to acquire replacement farm or ranchland in less environmentally sensitive locations.

In addition, with the current COVID-19 pandemic, recession and economic upheaval, the idea of eliminating Section 1031 would be the final straw that would break the commercial real estate markets.
It is very important that the real estate community make its voices heard in Washington about the importance of the Sec. 1031 Like-Kind Exchange; that it creates and preserves jobs; and that it is used by a broad spectrum of taxpayers, from middle class & small businesses to large enterprises, to synergistically spur on our economy.

Please let your members of Congress know that the 1031 Like Kind Exchange is important to you, your clients, and our American economy.
The Inland Real Estate Group of Companies, Inc., is a proud member of the following organizations that support Sec. 1031 Like Kind Exchange and will be working with them to educate our elected officials as to the importance of Section 1031:

Alternative & Direct Investment Association                     NAREIT
Certified Commercial Investment Member                          National Apartment Association
Commercial Real Estate Finance Council                              National Association of REALTORS
Federation of Exchange Accommodators                           National Multifamily Housing Council
Institute for Portfolio Alternatives                                        REALTORS Land Institute
International Council of Shopping Centers                         Society of Office and Industrial REALTORS
Institute of Real Estate Management                                    The Real Estate Roundtable
Mortgage Bankers Association                                               United States Chamber of Commerce
Commercial real estate brokers come in all varieties. I suppose like any profession. You have experienced ones and inexperienced ones. You have hard-working ones and lazy ones. You have brokers who actually care and those who don’t really give a darn. Those who are willing to be held accountable and those who aren’t.
You get the picture.
I honestly believe most brokers want to do a good job for their clients. We all hope and plan for a positive outcome. But it doesn’t always work out, sometimes through no fault of our own.
Questionable motivation of the owner, unrealistic pricing, poor property condition, bad location and poor market are some common reasons why properties legitimately don’t sell or lease. In some cases, it would be better if the property owner Googled “magicians” rather than waste a broker’s time.
But if you’ve hired a broker to market your property or find you a property and that broker is not performing to your expectations (getting you the desired result) when should you “pull the plug”? The answer to this question is a function of the broker’s conduct on your behalf.
Is the broker doing what he (or she) said he would do to market your property? (There should be a written marketing plan in place that is being executed). Has the broker given you concrete understandable advice on valuation of your property? Does the broker return your phone calls or emails in a timely manner? Are you able to go online and get activity/status reports for your particular property 24/7 or at least a periodic written status report?
Does the broker patronize you and tell you what you want to hear or does he tell you “like it is”? Is the broker experienced enough to give you counsel and actionable advice? How far does your broker have to drive to show your property? If it is more than 30-45 minutes, it’s really tough to justify the travel time, and scheduling timely appointments with buyers or tenants can be problematic.
Does the broker know and understand this particular geographic market? Does the broker actively solicit cooperation from the rest of the brokerage community? These are just a few questions you need to ask and get satisfactory answers to before you can make a decision.
Most brokers will put in a lot of time and effort trying to solve your real estate problem. A tremendous amount of up front work is done by the brokers, many hours of effort, without the broker making a dime.
At a certain point in the timeline of marketing a property, some brokers might tend to look at his time invested in a property and want to cut his losses if the property is not attracting interest. He either might ask to cancel the listing or continue to limp along without a lot of enthusiasm, going through the motions, hoping for a stroke of luck before the natural expiration date severs the relationship. But then again, some brokers are “true blue loyal” till the end and want to finish every job they start.
Whatever you do, don’t change brokers just for the sake of change. When the average time on market is 12-18 months, canceling a listing after six months might be unfair.
If you must make a change, find a broker who will bring fresh energy and a different approach to solving your real estate problem. Providing more exposure mediums is better than less. Look to see who has the preponderance of signs and ask around for a referral. Make the broker tell you what he has sold or leased lately to see whether he is all talk or prone to getting things done.

Bruce Kaplan, Senior Broker Associate
Bruce Bossow x 12 / C: 847-732-3462
Bruce Kaplan x 20 / C: 847-507-1759
Heather Schweitzer x 15 / C: 815-236-9816
Heide Casciaro x 26 / C: 847-774-5660
Joe Billitteri x 21 / C: 847-833-5004
Kevin Kaplan x 13 / C: 309-261-0920
Sharon Glasshof x 14 / C: 847-533-6974
Brian Cowell x 18 / C: 815-529-7890
Angela Pletz x 24 / C: 815-861-7124
Mike Deacon x 28 / C: 815-814-6500

 9225 S. IL Route 31
Lake in the Hills, IL 60156