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Powerpoint presentation for Edmund & Wheelers 4 HR. CE course for accountants.
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Shhhhh.
Don’t tell anyone.
Your clients are eligible forinterest free loans from the USand State Government…
…for as long as they’d like.
…for as many times as they’d like.
Of the approximately $200 Billion in commercial real
estate transactions during 2008, it is estimated that 20-25% could have
benefited from Section 1031 treatment.
Only 3% did.
What’s In It For You?• Absolutely Part of Your Fiduciary Responsibility
• Tax Ramifications on the Sale of Investment/Trade or Business Property are Key
• Clients Will Appreciate Your Resourcefulness• Section 1031 has wide applicability in your
accounting practice• Help Your Clients strategize the sale and repurchase of their holdings. • Property portfolios may be realigned tax free.
• Become Involved With Client’s Real Estate Strategy• Strengthen & Expand Your Referral Base
Today We Will Explore…
• What Is Section 1031?• Section 1031’s Misconceptions• How To Recognize When to Use Section 1031?• Who Qualifies For an Exchange?• How to Report an Exchange• What Qualifies For an Exchange?• Real-life Examples of Our Exchanges• Alternative Exchange Strategies
Primary Objectives of This Course
• Provide a Basic Section 1031 Education
• Provide Tools & Information Enabling You to Better Serve Your Clients
• Assist You In Recognizing the Strategic Applications of Section 1031 and to ExploreAlternative Replacement Strategies
Primary Objectives of This Course
• Help You to Understand How Section 1031 Integrates Into Your Client’s Overall Financial Goals & Objectives
• We will Demonstrate our Ability to Become Your Section 1031 Resource in the Future
What Is An Exchange?• Method to sell Investment and/or Trade or Business Property
and replace it with New Property that doesn’t trigger any tax.• Its essential elements are: The Client must:
– Give a Deed (or a Bill of Sale);– Get a Deed (or a Bill of Sale); and– Don’t handle Cash
The Five Critical Elements
1. Intent
2. Form and Documentation
3. Control of Funds
4. Like-Kind Properties
5. Time Limits
The Regulation - Section 1.1031(k)-1
“A deferred exchange is defined as an exchange in which, pursuant to an agreement, the taxpayer transfers property held for productive use in a trade or business or for investment (the ‘relinquished property’) and subsequently receives property to be held either for productive use in a trade or business or for investment (the ‘replacement property’).”
QI
Section 1031(a)(1)
“No gain or loss shall be recognized on the
exchange of property held for productive use in trade or business or for investment if such property is exchanged solely for property of like kind which is held either for productive use in a trade or business or for investment.”
Section 1031 Works ONLY with Investment/Trade or Business Property
YOU MUST PROVE INTENT!
Section 1031 Works ONLY with Investment/Trade or Business Property
YOU MUST PROVE INTENT!
Exceptions to Section 1031 (Sec.1031(a)-(2))
• A. Stock in trade or other property held primarily for sale
• B. Stocks, bonds or notes• C. Other securities or evidences of indebtedness
or interest• D. Interests in a partnership• E. Certificates of trust or beneficial interest• F. Choses in action (litigation rights)
What is Investment Purpose?
• Investment is the passive holding of property for more than a temporary period with the expectation of appreciation
• Real estate (even if unproductive) held by a non dealer for future use or increment in value is held for investment and not primarily for sale (Reg. 1.1031(a)-1(b))
• Thus property held for sale in the immediate future is not held for investment
What are the benefits of an Exchange?• Full capital gains tax deferral (Exchange goes Even or Up)
• Relocation of investment
• Change in investment type
• Diversification of investment
• Planning of investment
• Solve problem of joint ownership
• Increase cash flow
Three Essential Elements:
• The properties must be exchanged (not sold)
• Both the “Relinquished Property” and the “Replacement Property” must be held by the same taxpayer for investment or productive use (“Identity of Taxpayer Rule”)
• The properties must be “Like-Kind” with one another– Real property for real property– Personal property for personal property– Matching in value or the new property more expensive– “Boot” results when the old property is more expensive
Replacement Property Rules @ Reg 1.1031(k)-1-(c)(4)
• The Three Property Rule The Exchangor may identify up to three (3) properties, without regard to value; or
• The 200% Rule The Exchangor may identify more than three properties, provided their combined fair market values does not exceed 200% of the value of the Relinquished Property; or
• The 95% Rule The Exchangor may identify any number of properties, provided the Exchangor acquires 95% of those properties (by value).
• Properties received before the 45th day do not have to be identified, but must appear on one of the ID’s after Day 45.
Like-Kind Requirement:
• The term “like-kind” refers to the nature or character of the property and not to its grade or quality (Reg 1.1031(a)-1(2)(b))
• Real property cannot be exchanged for personal property (Reg 1.1031(a)-1(2)(b))
• Qualifying personal property can be exchanged for property of a similar character (NAICS (formerly SIC) Codes must match; the Code must fall within Sector 31, 32 or 33 of NAICS; last digit cannot be a 9.) (Regs 1.1031(a)-2, et seq.)
Examples of Like-kind
• Improved real property for Unimproved real property (Reg 1.1031(a)-1(2)(b))
• Lease for >30 years (Reg 1.1031(a)-1(2)(c))
• Partial interest for a whole interest
• One property for more than one property and vice versa
Like - Kind
Single Family Dwelling
Land
Apartments
Condos
Commercial Development
What is Like Kind?
ANY REAL PROPERTY IS LIKE KIND WITH ANY OTHER REAL PROPERTY….
Apartment Building
Single Family Dwelling
What is Like Kind?
ANY REAL PROPERTY IS LIKE KIND WITH ANY OTHER REAL PROPERTY….
Multi-family Dwelling
Single Family Dwelling
What is Like Kind?
ANY REAL PROPERTY IS LIKE KIND WITH ANY OTHER REAL PROPERTY….
Land Development
Single Family Dwelling
What is Like Kind?
ANY REAL PROPERTY IS LIKE KIND WITH ANY OTHER REAL PROPERTY….
Commercial Property
Single Family Dwelling
Personal Property (Regs 1.1031(a)-2, et seq.)
• Same General Asset Class or Product Code• North American Industry Classification System• Sector 31-33: Manufacturing
– Examples: Construction Equipment, Well Drilling Equipment, Logging Equipment, Commercial Vessels, Commercial Laundry Equipment
– See www.census.gov/naics
Timing is everything!• The Exchange Period begins on the transfer of the
Relinquished Property – This is Day #0
• Exchangor must identify qualified Replacement Property within 45 days of closing (the “Identification Period”)
• Exchangor must acquire within 180 days, or due date of the tax return (counting extensions) for the tax year of the sale (the “Exchange Period”) (Reg 1.1031(k)-1(b), et seq.)
• There are no extensions unless a federal disaster is declared in the vicinity of the taxpayer or the property.
Can Anyone Handle An Exchange?• No! It must be a “Qualified Intermediary”(QI) as defined by
regulation: see Regs 1.1031(k)-1(k), et seq.
• Cannot Be the Exchangor or a Relative (Sec. 267(b) or Sec. 707(b)(1))
• Cannot be an Agent of the Taxpayer§ One who has acted as employee, attorney, accountant, investment
banker, broker or real estate agent within the past 2 years
§ The QI Handles All Aspects of the Exchange and Should be Involved EARLY in the Process
What does the QI do? Regs 1.1031(k)-1(g)(4), et seq.• Creates Exchange Agreement; signed by Taxpayer.
• Has Legal Standing as the substitute Seller of Relinquished Property and substitute Buyer of Replacement Property (Assignee Seller/Buyer).
• Notice of the Assignment required to be given to Buyer and Seller, with Closing Instructions to both Settlement Agents.
• Banking, Safeguarding & Delivery of Exchange Funds
• Assurance of Critical Deadlines Including the 45 & 180 Day Deadlines
• Final accounting for tax purposes
Who Qualifies for an Exchange?
Owners of investment property and business property may qualify for a Section 1031 deferral. Individuals, C Corporations, S corporations, partnerships (general or limited), limited liability corporations, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031.
Ref - www.irs.gov
Does Your Situation Qualify?
The Five Most Common Section 1031 Misconceptions
1 All 1031 Exchanges must involve swapping or trading with other property owners......
The Five Most Common Section 1031 Misconceptions
2 It’s required that all types of 1031 exchanges must close simultaneously......
The Five Most Common Section 1031 Misconceptions
3 "Like-kind" means purchasing the same type of property which was sold.......
The Five Most Common Section 1031 Misconceptions
4 1031 Exchanges must be limited to 1 exchange and 1 replacement property.......
The Five Most Common Section 1031 Misconceptions
5 A Section 1031 is NOT a path to cash.
What about the States?
• All states but one (PA) allow a Section 1031 within or outside the state; PA taxes even in-state 1031’s
• States follow the Federal rules closely.• Some states w/ income taxes (e.g. CA, ME, NJ, NY,
RI, VT) require a Waiver of (state tax) Withholding• Other states w/ income taxes (MA) don’t bother• Land Gains Tax in VT: Old & New properties must
be in-state; New Property takes Old Holding Period • Some states (ME, VT) have a formal Waiver; others
CA, HI, NJ, NY, RI, SC) permit a Seller Affidavit.
IRS Form 8824 – Reporting an Exchange
Property Information& Exchange Dates
Related Party - Sec. 267(b) or Sec. 707(b)(1)
123 Main Street, City, State; 4 Family Rental
456 Main Street, City, State; Single Family Rental
1 2 1997
6 1 2008
7 16 2008
11 28 2008
Part II
Part III
Related Party? YESLine 8, NO Line 12
Related PartyInformation
Must remain NO for two tax years
Joe Related Taxpayer Brother XXX-XX-XXXX
789 Main Street, City, State, Zip
If 9 or 10 is YES, 11 C is most probable answer (attach statement)
Related Party - Sec. 267(b) or Sec. 707(b)(1)
Multi-asset Exchanges
“Boot”
FMVOld basis + “New money”
Eg. A buildingfor vacant land
What is “Boot?• If the Price + costs of the New Property is less than the
Price – costs of the Old, Boot results.
• Boot can be avoided by exchanging even or up
• Boot is property of an Unlike Kind; Cash Boot is net cash; Mortgage Boot is less net debt.
Boot Triggers TAX…
…The ExchangeCould Still Work!
What is “New Money” (Basis Additions):
• The Taxpayer picks up new basis for all “New Money” that is added to the transaction.
• “New money” = Net new cash + Net increase in debt
• “Strike Price” = Sales price – costs
• Taxpayer gets increased basis if the New property + acquisition costs = or exceeds the Strike Price
Exchanges that cross 2 tax years:
• Reported for the year of the sale of the Old Property
• July 5 + 180 days (or Nov. 17 + 45 days) = Jan. 1st
• Election under Reg. 1.1031(k)-1(j) (Coordination of Sec. 1031 & 453):
• Provided the Client had a bona-fide intention to exchange at the start of the Exchange Period
Can a Failed Exchange be fixed?
• IRS Regulations allow a sale to be rescinded within the same tax year if the parties are restored to their original positions (Rev Rule 80-58)
– Un-close with the Buyer.
– Re-close with the Buyer properly, using a Q.I.
GEF EditsSection 1031 Exchanges for Partnerships• Exchange must be at the entity level; partnership interests
(or those of any entity) are not exchangeable per 1031(a)-2• Nor does the “Drop & Swap” technique work either. If a
partnership asset is distributed to a partner, that person must establish a separate “holding period” in the asset before the exchange (1 year minimum; 2 years better).
• IRS is now asking on Form 1065: “At any time during the tax year, did the partnership distribute to any partner a tenancy-in-common or other undivided interest in partnership property?” (Question #14)
GEF Edits
Partnerships (cont’d)4. Nor does the “Swap & Drop” technique work either,
where the entire partnership does the exchange and then distributes some or all of the property it receives to departing partners.
5. On Form 1065, IRS now asks the following question: “Check this box if, during the current or prior tax year, the partnership distributed any property received in a like-kind exchange or contributed such property to another entity (including a disregarded entity)” Question #13
GEF EditsPartnerships: So what to do?6. Identify the partners who want to depart; preserve the
partnership at all costs; must have at least 2 members.7. Close on the asset, but reserve out enough “boot” to
allocate to the partners who want to leave; the rest of the sale is handled by the QI in the usual way.
8. The departing partners get the cash and the allocated debt relief, and pay tax on these funds per their basis in the partnership.
9. The remaining partners go forward and take in the like-kind Replacement Property.
10. This preserves the partnership EIN #, and its holding period.
GEF Edits
• So what to do? (cont’d)11. This leaves the answers to Questions #13 and
#14 on Form 1065 “No.” The partnership would issue all of the partners K-1 returns, however, in addition to the figures for the normal partnership operations for the prior year, those that took cash or distributed debt relief would have that fact and the correct amounts stated on their K-1.
Break Time…
The Power of Section 1031
What happens when both participate in 3 typical real estate transactions…
…with radically different approaches?
Hypothetical Example Assumptions
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First Transaction - Today
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Second Transaction – In 5 Years
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Third Transaction – In 10 Years
Courtesy of Grubb & EllisCommercial Real Estate Services
Fourth Transaction – In 15 Years
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$361,336 $507,000
$108,400 $152,100
($21,680) $ 0
$448,056 $659,100
$2,240 $3,296
Summary of Wealth Building Benefits
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4th Transaction $448,056 $659,100
Cumulative Increase 49.3% 119.7%
Summary of Increased Cash Flow
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At 15th Year
The After-Tax Analysis (a sale in Year 15)• Owner #1 (in Year 15)
– Has Property worth $448,056; all taxes have been paid
• Owner #2 (in Year 15)– Has property worth $659,100, with $136,810 tax due
• Net Result (after tax):– Owner #2 has $74,234 more wealth than Owner #1, and
has received $92,779 more income than Owner #1.
– But why would Owner #2 ever pay the tax when s/he can exchange over & over, using THE POWER OF SECTION 1031?
The Most Common Exchange Types
• Delayed Exchange (Regs 1.1031(k)-1, et seq.)– The client sells his property, identifies Replacement Property options
within 45 days, then purchases the property(ies) within 180 days.
• Reverse Exchange (Rev. Proc 2000-16 & 2004-51)– The client purchases (with a Single Purpose Entity) the Replacement
Property before his current property is sold. The client then has 180 days to close on his Relinquished Property.
• Build-to-Suit (Reg 1.1031(k)-1(e), et seq.)– The client wishes to purchase and improve Replacement Property(ies)
with the proceeds from the sale of his Relinquished Property. This is accomplished with a Single Purpose Entity, a/k/a an Exchange Accommodation Titleholder (“EAT”).
Reverse Exchanges – Choice of Entity
• The EAT Can Be an Individual or an Entity– Using an Individual is Very Dangerous (Liability/Bankruptcy/Death)
• For Protection the Entity Should be an LLC or C-Corp
LLC C-Corp
Can Convey LLC Membership
Could Save Transfer Taxes (Not NH)
Fiscal Tax Year No Tax Filing in
Middle of Exchange
Better Audit Trail
Reverse Exchanges – Transfer Taxes
• Most States (Including NH) Charge 2 Transfer Taxes:• Property Conveyed to the EAT• Property Conveyed out of the EAT
• ME and VT Offer a Waiver of The Second Tax• Waiver MUST be Applied For BEFORE the Second Closing• NH Collects Taxes on ALL Deeds With Few Exceptions
Case StudiesThe case studies outlined are presented as a representation of the 5 most common types of Section 1031 exchanges.
Please note that the case studies have been simplified and several essential steps have been omitted for clarity. Click on the case study you would like to review.
www.section1031.com
Case Study 1ABDC-Delayed Exchange (Existing Property)Direct Format
CAMPGROUND FOR SEVERAL SINGLE FAMILY RESIDENCES
One campground exchanged for 16 new properties…
…including 2 new campgrounds.
6 PROPERTIES FOR A DOZEN CONDOMINIUMS
Sold six properties to aggregate funds to buy…
…over a dozen brand new condo units.
CONVERTING INVESTMENT PROPERTY TO PERSONAL RESIDENCE
Exchange for your dream home, rent it for two years…
…convert it to your primary residence.
Note changes in Section 121 after 1/1/09 make the non-primary residence time periods taxable.
ACQUIRE A RENTAL PROPERTY FOR A FAMILY MEMBER
Exchange for a home for the kids…
…charge Fair Market rent.
..After two (2) years, begin gifting the property.
(Rev Proc 2008-16)
Case Study 2ACBD-Delayed/Simultaneous Exchange (Existing Property)Reverse Format - Exchange Last
BUYING A NEW PROPERTY BEFORE THE OLD PROPERTY SELLS
Taxpayer Negotiates the Purchase of a Significant New Property…
…but is unable to sell a piece of existing property in time to do the deal…
…Park the New Property in an EAT; 180 more days are available to sell the Old Property and complete the Section 1031 Exchange….
Case Study 3ACBD-Delayed, Build-to-suit (or Improvement) ExchangeDirect Format
COMMERCIAL PROPERTY FOR RAW LAND WITH IMPROVEMENTS
Taxpayer sells an existing commercial property…
…EAT buys a vacant lot and builds a new building with the funds…
…and delivers to Taxpayer as improved, within 180 days….
Case Study 4ACBD-Delayed/Simultaneous Build-to-suit ExchangeReverse Format - Exchange Last
INDUSTRY SPECIFIC BUILDING ON IDENTIFIED PROPERTY 180 Days (total) are available – Rev Proc 2000-37
EAT Builds a new building to Taxpayer’s specs, using borrowed funds…
..Taxpayer takes occupancy..
…then sells existing property..
…...And, Exchanges with the EAT to finish the transaction…
Case Study 5Delayed Exchange (Existing Property) Reverse Format - Exchange First
BUY INVESTMENT PROPERTY ABUTTING A PRIMARY RESIDENCE:
Taxpayer deeds F & C rental property to EAT…
..EAT borrows equity from taxpayer or the bank..
..Equity $$ used to Purchase abutting shore front land …
…EAT sells rental property to a Buyer to pay off the debt..
4 $imple Qualification Questions…
1. What’cha Got?
2. Howd’ya Get It?
3. What else ‘ya Got?
4. What’cha Want?
1. What’cha Got?– How has the property been used in the
client’s hands?
– Has there been personal use of the property? (Rev Proc 2008-16)
– Does the property include personal property or other intangibles?
– What is the Purchase Price Allocation?
2. Howd’ya Get It?– As the result of a previous Exchange?
– Is the property from an estate or family, or was it gifted?
– How long has the property been owned?
– What is the Adjusted Cost Basis?
3. What else ‘ya Got?– Is there other property being sold?– Are there other property rights or
easements? – Any excess land associated with their
primary residence?– Does the transaction need to be bigger,
smaller or done in stages?– “Find a way to make it bigger; find a way
to make it smaller” Warren G. Harding
4. What’cha Want?– What is the short term/long term strategy
for the property?– Ideally the value should be even or up.– An important element of building wealth is
the use of untaxed funds.– Diversify in type, location, quantity &
quality of the Replacement Property.– In an Exchange, the adjusted cost basis
shifts first, followed by the cash or debt.
Break Time…
Alternate Exchange Opportunities
THERE ARE A MYRIAD OF OTHER INVESTMENT OPPORTUNITIES THAT CAN BE ACCOMPLISHED WITH AN EXCHANGE!
Tenants - In - CommonTENANTS-IN-COMMON (TIC’s) OFFER A STRESS-FREE OPTION TO OWN INVESTMENT GRADE REAL ESTATE
Tenants-in-commonAny Real Property
Why Use TICS in an Exchange?
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Who is a Typical TIC Investor?
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TIC Property Characteristics• Undivided Fractional Ownership in Real Estate• Each Owner Receives a Proportional Share of Net
Revenues• Under Sponsored Structure, TIC’s are:
• Grade “A” Real Estate Investments• Professionally Managed
• The Result Is A Passive Ownership
Courtesy of Grubb & EllisCommercial Real Estate Services
Direct Ownership vs. TICConventional Direct Ownership
Property Exchange 1031 Tenant-in-Common
Property Exchange
Lower returns on less desirable properties Higher returns on institutional-quality properties
Difficult to comply with Section 1031 45 day ID rules; Exchangor must find properties
Easy to comply with Section 1031 45 day ID ruleswhen properties are pre-identified
Difficult to match Section 1031 exchange debt and equity
Easy to match Section 1031 exchange debt and equity
Investor must negotiate and arrange loan Prearranged financing
Expensive and time-consuming property management
Professional proven property management in place. You receive a monthly or quarterly income check.
Cash flow, depreciation, and appreciation potential
Cash flow, depreciation, and appreciation potential
Ability to use the Section 1031 exchange again Ability to use the Section 1031 exchange again
Ability to refinance and distribute proceeds “tax free”
Ability to refinance and distribute proceeds “tax free”
Diversification
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How Does it Work?
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1. Client sells investment property (“Relinquished Property”).
2. Proceeds transferred to QI (Edmund & Wheeler, Inc.)
3. Client and advisor identify potential Replacement Properties through a myriad of sources within their 45-day Identification Period.
4. Client is granted a reservation.
5. Client and advisor fill out necessary paperwork to close.
6. Client is on title and receives a deed to the Replacement Property.7. Client assumes a % interest of non-recourse financing (1)
8. Client receives a % interest of the income generated from the property.
9. At the sale, the client receives a % share of any and all profits.
Case Study
Courtesy of Grubb & EllisCommercial Real Estate Services
Assumptions
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Investment Results
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Recap the Benefits
Umbrella Partnership Real Estate Investment Trust (UP-REIT)
Any Real Property
Exchange!
What Is An UPREIT?
• Similar to a Mutual Fund For Real Estate Investors.
• Allows Exchanging Real Property Into Operating Partnership (OP) Shares of Existing REITs
• REITs can convert existing properties into TICs allowing 35 ownership positions; then, under Section 721:• TICs are then converted back to REIT shares and
investors then hold shares in the REIT’s entire portfolio.• Portfolio is professionally managed with 95% of the net
income to investors.
Section 721 Exchange Overview
• Instead of Selling and Exchanging, The Investor Contributes Property to a Partnership
• Receives Operating Partnership (OP) units.
UPREIT Benefits• Transaction completed on a tax-deferred basis. If
shares go to an estate the ultimate recipients will receive a stepped-up tax basis (An interest-free loan followed by tax forgiveness).
• Transaction can be structured by enabling property owner to convert an interest in a specific property into a larger, more balanced portfolio held by the UPREIT.
• Allows an interest in illiquid individual properties to become more easily saleable; convert real estate to shares of stock.
• Convert a high-valued property into tiny, marketable pieces.
Oil & Gas LeasesINVESTORS CAN EXCHANGE REAL PROPERTY FOR INTERESTS IN PRODUCING OIL & GAS ENTERPRISES
Any Real Property
Oil & Gas LeaseAN EXTREMELY VIABLE ALTERNATIVE FOR AN EXCHANGE.
• Working and Royalty Interest
• Leasehold Interest Allows the Right to Search for and Produce Oil and Gas
• Fractional Owners Have the Same Rights as a Single Owner and Can subdivide or Offer for Sale on the Open Market
Oil & Gas Lease Characteristics
• Liquidity• Active Secondary Market
• Life of Production• Supported by Qualified 3rd Party Reports
• Annual Return• Average 8% - 12% (+) Over Term
• Tax Treatment• 15% Depletion Allowance
• Valuation• Valued on the Amount of Potential
Production
Oil & Gas Lease Benefits
• Immediate Economic Closing With Predictable Cash Flow
• Ability to Participate in the Future Production
• Highly Liquid Individual Fractional Ownership
• Diversification By Investing In One or Several Qualified Working Interests in Different Markets
Structured Sales (Section 453)STRUCTURED SALES ALLOW THE INVESTOR TO ARRANGE FOR A FUTURE PAYCHECK
Any Real Property
Exchange!
The Structured SaleThe Structured Sale is a method for selling appreciated assets such as real estate and businesses that allows Sellers to:
•Defer capital gains taxes to future years•Collect a stream of guaranteed payments over a set number of years•Without having to trust the Buyer or to get an unwanted Balloon payment
In Addition:
•Makes the transaction safer for the Seller; guarantor is Allstate, not the Buyer•Can be combined with a Section 1031 Exchange or be used alone•Absolutely no risk of getting the old property back
This method was developed in 2005 and is becoming a sought-after method for tax deferral when selling a business or real estate.
The Structured Sale & Section 1031
• Identified as an Alternative Strategy In Exchange Agreement
• Gives Buyer Full Title
• Can Be Used When Replacement Properties Cannot Be Identified and/or Purchased in the 45/180 Day Time Restraints
• Can Be Used For Taxable “Boot”
The Structured Sale & Selling a Business
• There is Inherent Risk Associated With a TypicalInstallment Sale
• The Structured Sale Provides a Safe Alternative
• Can Be Used in an Exchange for non “like-kind” Items like goodwill and FF&E; or
• Can be used for the entire transaction amount if the client wants to exit the real estate class
The Structured Sale
How Do You Summarize 109 Slides?
Quickly!
Section 1031 is the same as an interest-
free loan from the Government
Section 1031 is used in less than 10% of the transactions that it
should be!
Accounting Professionals owe it to
their clients to understand this powerful tool!
Section 1031 is about Relocation and
Reallocation of Assets without Paying Capital
Gains!!!
Any U.S. Real Property Can Be Exchanged For
Any Other U.S. Real Property!
Section 1031 can be used to dramatically increase the value of
holdings by leveraging Uncle Sam’s money.
Ask the 4 Questions1.What’cha Got
2.Howd’ya Get It?3.What Else ‘ya Got?
4.What’cha Want?
Every tax-paying entity qualifies for a Section
1031 Exchange!
Personal property can also be Exchanged.
“Like-kind” is literal!
There are replacement options available for
Section 1031Understand Them!
Tenants-In-CommonManagement-Free
Real Estate Investments in Grade A
Properties
UPREITExchange into a Real
Estate Investment Trust
Oil & GasA timely alternative to
owning real estate with the same benefits and
flexibility.
Structured SalesAn annuity based
“Paycheck” for failed exchanges and
business transfers.
Also…with Section 1031 alone:
• Must employ a Qualified Intermediary• Time limits of 45 and 180 days• Properties must be “Like-Kind”• Business or Investment Purpose• Relinquished and Replacement Properties held
by same taxpayer• Exchanges can be done either forward (Cases #1
& #3) or reverse (Cases #2, #4 & #5)
If you have questions...If your clients have
questions…If you want to strategize…..
…Contact UsFor over 27 Years Edmund & Wheeler has helped clients to defer $Millions…
Congratulations!You are now a member of the elite, the proud, the educated….
Edmund & Wheeler, Inc.
Alumni Association
Membership has it’s benefits!
www.section1031.com/alumni
For over 27 Years Edmund & Wheeler has helped clients to defer $Millions…
…we want to earn the distinction of being your Section 1031 resource.
603-444-0020www.Section1031.com
Thank you for your valuable time!!!