Leveraging a 1031 in a Hot Market: Reverse Exchanges

We often receive phone calls from long-time real estate investors who are selling property, or are thinking about it, curious if we have exchangers who may have an interest in their property. In point of fact, in a lot of our markets, the investment/commercial market is pretty aggressive right now, and investors with good properties are being contacted out of the blue with offers from willing buyers. The big question is always, "Fine, I have a buyer, but what will I do with the proceeds from the sale?"

For some, the answer might be a "
structured sale"; for others, especially those with their eye trained on the market, it might be the use of "reverse exchanges" to tie up good replacement properties while waiting for a suitable buyer for their relinquished property, or for the closing process to come to completion.

1031 and Pennsylvania Tax
Efforts Underway to Recognize 1031

All states that have an income tax regime recognize tax-deferral under section 1031, except the Commonwealth of Pennsylvania. Not only is it a disadvantage to PA taxpayers and property owners but non-recognition treatment of 1031, makes the Commonwealth less competitive when trying to lure new investors or business owners.

Currently, there are two bills that have been introduced to bring like-kind exchanges to Pennsylvania;
Senate Bill 601 and House Bill 700. The Pennsylvania Association of REALTORS® is supporting the bills and Margo McDonnell recently joined REALTORS® in Harrisburg to raise awareness of the benefits of section.

To allow like-kind exchanges will cost the Commonwealth between $10 - 20 million in income taxes per year. The many ways the benefits of the like-kind exchanges would benefit the Commonwealth and its associated revenue was discussed in their
talking points.

No doubt we will be asking our PA property owners and their advisors to send letters when the time is right. 1031 CORP.
will continue to
keep you posted.

1031 and Tax Reform Update
1031 Remains Under Fire

In his FY 2017 proposed budget, President Obama has once again proposed limiting the tax-deferral benefits afforded under section 1031. 

Margo McDonnell, Danielle Brock and a few FEA members met with Senator Wyden of Oregon
Under section 1031 of the Internal Revenue Code, no gain or loss is recognized when business or investment property is exchanged for "like-kind" business or investment property. The Administration proposes to limit the amount of capital gain deferred under section 1031 to $1 million (indexed for inflation) per taxpayer per taxable year. In addition, art and collectibles would no longer be eligible for like-kind exchanges. The proposal would be effective for like-kind real and personal property exchanges completed after December 31, 2016. This is the third year in a row he has proposed limiting the deferral and expanded it to include personal property.


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Trending this Month...High Rise

Delaware Statutory Trusts (DSTs) are all the Rage

A Delaware Statutory Trust (DST) is a fractional ownership in a large commercial or residential property or properties. We have seen an increasing number of Exchangers buying into a DST as replacement property which often include a portfolio of properties and is considered a passive investment.

Click for more information on DSTs

View All Recent Trends

Article Exchange
Following are articles related to 1031 exchanges, taxes, real estate and related topics you may find of interest
July 19, 2016

Mortgage Rates Stay Near Record Low
July 15, 2016
June 29, 2016
May 18, 2016
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. 
Message from our President
Margo McDonnell

Dear Friends,

You are all keeping the 1031 CORP. Exchange Team very busy and we love it! This March and April were our busiest March and April in our 25 year history! This is especially exciting because the 1031 industry saw real property exchange transactions drop 80% between 2005 and 2010. 1031 CORP. was pretty typical, but has emerged from the recession stronger than ever.

With interest rates continuing to hover near all-time record lows, the greater availability of financing, lower unemployment rates and greater consumer confidence, the real estate market is on fire. We are seeing increased exchange activity in both the residential and commercial sector. There is also an uptick in the number of personal property exchanges involving business equipment. Business owners are upgrading to increase efficiency and profits. This is happening all over the country and all property owners are benefitting from higher property values.

Happy Summer!

Warm regards,


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. Our Exchange Team, which includes Certified Exchange Specialists®, 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.
In This Issue

Margo McDonnell

Margo McDonnell, CES®
Certified Exchange Specialist®
1.800.828.1031 ext. 212
Mobile: 610.680.6896
Find me on Facebook
View my profile on LinkedIn

1031 CORP. Logo

Sue Umstead, CES ® 
Certified Exchange Specialist®
Senior Vice President
1.800.828.1031 ext. 208
Mobile: 610.755.8520

Find me on Facebook
View my profile on LinkedIn

1031 CORP. Logo

Marissa LoCascio, CES ®
Certified Exchange Specialist®
Vice President, Exchange Manager
1.800.828.1031 ext. 210
Mobile: 610.742.4351

Find me on Facebook
View my profile on LinkedIn
Cindi Platt-Elliott
Exchange Officer
1.800.828.1031 ext. 216
Mobile: (610) 551-2033 
Marilyn Johnson
Exchange Officer
1.800.828.1031 ext. 207

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