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Message from our President
 | | Margo McDonnell |
Dear Friends,
I want to sincerely wish you a Happy Thanksgiving! Not just at this time of year but every day, I am truly grateful for your business and friendship. I have the opportunity to work with an amazing team of professionals and help our clients accomplish their goals while doing something I thoroughly enjoy. Life is good!
This month, our newsletter highlights some of the best opportunities available through section 1031. You never know when someone will reread an article and have that "ah-ha" moment when they realize this just might work for me.
I also rerun the main article from our September newsletter about a successful title agency that launched a 1031 affiliate without having the expertise needed to ensure good exchange transactions. The article looks at the tax consequences for the taxpayer with a failed exchange and the repercussions for the 1031 company. 1031 CORP. routinely works with title agencies that let 1031 CORP. act as the qualified intermediary while they concentrate on doing what they do best -- being a great title agency!
Wishing you and yours a Happy Thanksgiving and a wonderful holiday season!
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Possible Conversion to Primary Residence Creates Planning Opportunities
After using a property acquired as replacement property in a 1031 exchange for business use or investment, you may convert the property to a personal use property. Generally, under Section 121 of the Internal Revenue Code, if used as a primary residence for at least 24 months within the last five years, you may exclude $250,000 of gain ($500,000 if married, filing jointly). Of course, you cannot have taken the Section 121 exclusion within the past two years. However, under HR 4520 (The Jobs Act) signed into law on October 22, 2004, by President George W. Bush, properties acquired in a 1031 exchange must be owned for at least five years and used at least 24 months of the last five years before allowed to take the Section 121 exclusion. Under Section 121, regardless of whether or not a 1031 exchange was involved, you cannot exclude depreciation recapture from May 6, 1997 forward so some tax may be due on the sale.
Learn More about the Conversion to Primary Residence
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Reverse Exchanges Continue to Create Opportunities
Preserve Ability to Defer Gain without a Buyer
With the real estate market continuing to heat up, buyers are forced to act fast once they find the property they want and they are up against other potential buyers offering more than the asking price and willing to close soon. Putting a contingency that your old property must close first is not as easy now as it was just a few months ago.
This has helped increase the use of reverse exchanges over the last twelve months as exchangers strive to get their desired property while preserving their ability to defer the gain. Learn more about Reverse Exchanges
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Exchanging Vacation Homes = Huge Savings
Planning and Patience Helps Preserve Wealth
After years of uncertainty as to whether or not vacation homes could be exchanged under section 1031, the IRS provided highly anticipated guidance in early 2008. The problem though was that no one qualified!
The guidance was in the form of a "safe harbor" provided in Revenue Procedure 2008-16 and creates the ability for vacation home owners of exchanging for another vacation home. To qualify for the protection of the "safe harbor," you would have to follow all of the rules which require you to rent the property for two years before you sell the old property and two years after you buy the replacement property while keeping your personal use to almost nothing. Most vacation home owners, especially those with resort properties along the East Coast, want to use their property often and have no desire to rent their property not even for just fourteen days annually.
Learn more about the Exchange of Vacation Homes
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1031 Exchanges Help Owners Grow their Business and Plan their Exit
 Most investors realize that 1031 tax-deferred exchanges provide a great vehicle to accomplish their short and long-term investment objectives. However, exchanges also create a vast array of opportunities to help business owners grow their business and preserve their wealth.
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Trending this Month...
Last Minute Exchanges
This month we have seen a significant increase in the number of last minutes closings. We have been opening new 1031 exchanges just a few days before the closing of the relinquished property. We anticipate this trend to continue thru the end of the year.
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 Join us for our complementary Wealth Building Webinar Series designed to help you build and preserve wealth.
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Inexperienced Qualified Intermediary Kills Taxpayer's 1031
 A recent case highlights the importance of using caution when choosing a qualified intermediary (QI) to facilitate your 1031 tax-deferred exchange. This case was not a tax case but a case that involved the taxpayer seeking damages from the QI. In Kreisers, Inc., et al. v. QI Title Limited Partnership d/b/a QI Title and d/b/a The Title Resource Network (SD 2nd Cir.), a title company also provided qualified intermediary services.
Kreisers was an s-corp that wanted to structure an improvement exchange that would allow them to use 1031 exchange funds to make improvements to the replacement property before they took title from the seller. An improvement exchange is a commonly used exchange strategy but it does take quite a bit of planning to structure properly.
The improvements must be completed before title of the replacement property is conveyed to the exchanger so the QI or Exchange Accommodation Titleholder (EAT) usually acquires the replacement property directly from the seller and makes the improvements before conveying the improved property to the Exchanger before the end of the 180-Day Exchange Period.
There were a number of mistakes made by the QI in this case including the QI hopefully just inadvertently committing tax fraud .
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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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Article Exchange
November 11, 2013
If you have an article you would like to share, please forward it to Margo McDonnell, CES� and we'll include it in next month's reading list.
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