Development

Tag: 1031 like-kind exchange

  • Support Section 1031 Like-Kind Exchanges

    Support Section 1031 Like-Kind Exchanges

    Section 1031 of the tax code positively impacts more than 19,500 communities, supports 568,000 jobs and adds $55 billion in value to our GDP.  1031 like-kind exchanges facilitate repurposing commercial real estate to a more productive use and helps American farmers better finance their operations. President Joe Biden’s proposed American Family Plan places severe limitations on Internal Revenue Code Section 1031 like-kind exchanges. Our communities will be severely impacted if we do not take action to preserve IRS Section 1031. 

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  • Stop the Rhetoric – Understanding the Social Impact of 1031 Exchanges on America

    When President Biden released his American Family Plan last week, under which Internal Revenue Code 1031 exchange real estate investors are choosing more and more to invest in social impact projects benefiting neighborhoods, communities, and our country. In recent years, up to 70% of targeted project funding needs were benefited by 1031 exchange proceeds. These included a Special Needs School in Minnesota in 2019, a Goodwill Store in Florida last year, and a Fertility Clinic in Illinois this year. Other examples include numerous Dollar General thrift stores, DaVita Kidney Care centers, CVS Pharmacies, Fresenius Medical Care dialysis centers, and Walmart’s. Since these projects are larger investment opportunities overall, aggregating multiple real estate investors’ exchange proceeds is necessary to ensure these impactful projects are completed. For the builders focused on making a social impact, 1031 exchange proceeds supporting social impact. Across the U.S., investors are recognizing the investment opportunities and the importance of securing rental properties to provide housing other than multi-family properties. During the COVID-19 pandemic, and for years to come, families will continue to seek a home as opposed to dense community living. For SFR companies that eventually sell the homes to their renters, using 1031 exchanges keeps their cost of capital low due to the deferral, which allows them to pass that on through lower rents and lower sale prices to the eventual tenant and buyer
    So, for skeptics out there, first understand the rules around 

  • Stop the Rhetoric – Understanding the Social Impact of 1031 Exchanges on America

    When President Biden released his American Family Plan last week, under which Internal Revenue Code 1031 exchange real estate investors are choosing more and more to invest in social impact projects benefiting neighborhoods, communities, and our country. In recent years, up to 70% of targeted project funding needs were benefited by 1031 exchange proceeds. These included a Special Needs School in Minnesota in 2019, a Goodwill Store in Florida last year, and a Fertility Clinic in Illinois this year. Other examples include numerous Dollar General thrift stores, DaVita Kidney Care centers, CVS Pharmacies, Fresenius Medical Care dialysis centers, and Walmart’s. Since these projects are larger investment opportunities overall, aggregating multiple real estate investors’ exchange proceeds is necessary to ensure these impactful projects are completed. For the builders focused on making a social impact, 1031 exchange proceeds supporting social impact. Across the U.S., investors are recognizing the investment opportunities and the importance of securing rental properties to provide housing other than multi-family properties. During the COVID-19 pandemic, and for years to come, families will continue to seek a home as opposed to dense community living. For SFR companies that eventually sell the homes to their renters, using 1031 exchanges keeps their cost of capital low due to the deferral, which allows them to pass that on through lower rents and lower sale prices to the eventual tenant and buyer
    So, for skeptics out there, first understand the rules around 

  • Stop the Rhetoric – Understanding the Social Impact of 1031 Exchanges on America

    When President Biden released his American Family Plan last week, under which Internal Revenue Code 1031 exchange real estate investors are choosing more and more to invest in social impact projects benefiting neighborhoods, communities, and our country. In recent years, up to 70% of targeted project funding needs were benefited by 1031 exchange proceeds. These included a Special Needs School in Minnesota in 2019, a Goodwill Store in Florida last year, and a Fertility Clinic in Illinois this year. Other examples include numerous Dollar General thrift stores, DaVita Kidney Care centers, CVS Pharmacies, Fresenius Medical Care dialysis centers, and Walmart’s. Since these projects are larger investment opportunities overall, aggregating multiple real estate investors’ exchange proceeds is necessary to ensure these impactful projects are completed. For the builders focused on making a social impact, 1031 exchange proceeds supporting social impact. Across the U.S., investors are recognizing the investment opportunities and the importance of securing rental properties to provide housing other than multi-family properties. During the COVID-19 pandemic, and for years to come, families will continue to seek a home as opposed to dense community living. For SFR companies that eventually sell the homes to their renters, using 1031 exchanges keeps their cost of capital low due to the deferral, which allows them to pass that on through lower rents and lower sale prices to the eventual tenant and buyer
    So, for skeptics out there, first understand the rules around 

  • Reporting a 1031 Exchange on IRS Form 8824

    After the real estate transactions in a 1031 exchange have been completed, there is a final step to report the exchange to the IRS so that the deferral is recognized. 1031 like-kind exchange, Form 8824 will need to be prepared and filed with the Internal Revenue Service (IRS).
    What is Form 8824?
    Titled, “Like-Kind Exchanges (and section 1043 conflict-of-interest sales),” Form 8824 serves two primary purposes:

    To allow business owners to report the deferral of gains through Section 1031 exchange, including:

    Description of the like-kind property (given up)
    Description of the like-kind property (received)
    Date the given-up property was originally acquired
    Date the received property was actually received

    Part one also asks if any like-kind property was either sold to or purchased from a related party. If the answer is yes, then the form’s preparer must complete Part II. If the answer is no, then the preparer may skip Part II and move on to complete Part III.
    Part II – Related Party Information
    It’s interesting to note, this section does not require any calculations. It simply asks for some basic information about the related party transaction, including:

    The related party’s name, address and relationship
    Timing of any dispositions (by the related party) of the property received from property owner
    Timing of dispositions related to the property acquired

    Background on Related Parties
    Part II addresses very specific concerns regarding what is known as basis shifting. In these transactions, 1031 Exchange Qualified Intermediary and facilitates 1031 exchanges. Always consult your CPA or tax advisor for advice pertaining to your specific tax situation. For more information, visit www.accruit.com or call (800) 237-1031.

     

  • Reporting a 1031 Exchange on IRS Form 8824

    After the real estate transactions in a 1031 exchange have been completed, there is a final step to report the exchange to the IRS so that the deferral is recognized. 1031 like-kind exchange, Form 8824 will need to be prepared and filed with the Internal Revenue Service (IRS).
    What is Form 8824?
    Titled, “Like-Kind Exchanges (and section 1043 conflict-of-interest sales),” Form 8824 serves two primary purposes:

    To allow business owners to report the deferral of gains through Section 1031 exchange, including:

    Description of the like-kind property (given up)
    Description of the like-kind property (received)
    Date the given-up property was originally acquired
    Date the received property was actually received

    Part one also asks if any like-kind property was either sold to or purchased from a related party. If the answer is yes, then the form’s preparer must complete Part II. If the answer is no, then the preparer may skip Part II and move on to complete Part III.
    Part II – Related Party Information
    It’s interesting to note, this section does not require any calculations. It simply asks for some basic information about the related party transaction, including:

    The related party’s name, address and relationship
    Timing of any dispositions (by the related party) of the property received from property owner
    Timing of dispositions related to the property acquired

    Background on Related Parties
    Part II addresses very specific concerns regarding what is known as basis shifting. In these transactions, 1031 Exchange Qualified Intermediary and facilitates 1031 exchanges. Always consult your CPA or tax advisor for advice pertaining to your specific tax situation. For more information, visit www.accruit.com or call (800) 237-1031.

     

  • Reporting a 1031 Exchange on IRS Form 8824

    After the real estate transactions in a 1031 exchange have been completed, there is a final step to report the exchange to the IRS so that the deferral is recognized. 1031 like-kind exchange, Form 8824 will need to be prepared and filed with the Internal Revenue Service (IRS).
    What is Form 8824?
    Titled, “Like-Kind Exchanges (and section 1043 conflict-of-interest sales),” Form 8824 serves two primary purposes:

    To allow business owners to report the deferral of gains through Section 1031 exchange, including:

    Description of the like-kind property (given up)
    Description of the like-kind property (received)
    Date the given-up property was originally acquired
    Date the received property was actually received

    Part one also asks if any like-kind property was either sold to or purchased from a related party. If the answer is yes, then the form’s preparer must complete Part II. If the answer is no, then the preparer may skip Part II and move on to complete Part III.
    Part II – Related Party Information
    It’s interesting to note, this section does not require any calculations. It simply asks for some basic information about the related party transaction, including:

    The related party’s name, address and relationship
    Timing of any dispositions (by the related party) of the property received from property owner
    Timing of dispositions related to the property acquired

    Background on Related Parties
    Part II addresses very specific concerns regarding what is known as basis shifting. In these transactions, 1031 Exchange Qualified Intermediary and facilitates 1031 exchanges. Always consult your CPA or tax advisor for advice pertaining to your specific tax situation. For more information, visit www.accruit.com or call (800) 237-1031.

     

  • Understanding the “Like-Kind” Requirement in 1031 Exchanges

    There are many requirements to ensure for a compliant 1031 exchange. One frequently posed question by potential exchangers pertains to what property is considered “like-kind” to another property. It relates to the term “like-kind” referring to two real estate assets of a similar nature irrespective of class or quality, that (if exchanged by the rules) can be replaced without realizing any taxable gain.
    The Internal Revenue Code (IRC) Section 1031 defines like-kind property as any property held for investment or use in a trade or business. The relinquished property and the replacement must be of like-kind to qualify for exchange treatment. Put simply, both properties involved in the exchange must be for use in a trade or business, or investment purposes. So, for example, although a personal residence or a vacation home is real estate, since it is held for personal use and not for investment, it would not qualify for exchange treatment. Property held as part of a dealer’s or developer’s inventory also does not qualify.
    What is “Like-Kind”? 
    The rules provide that the words “like-kind” reference the nature or character of the property and not its class or quality. Under the Regulations, things to consider include “the respective interests in the physical properties, the nature of the title conveyed, the rights of the parties, and the duration of the interests.” Based on these provisions, like-kind is defined in the tax code quite liberally in that any real estate is like- kind to any other type of real estate. For example, whether the real estate is improved or unimproved is not significant. Many court cases and rulings have addressed the like-kind standard for real property. Regulations provide examples of like-kind real property, some of which are obvious, others less so. Below are examples of real property interests that can be exchanged for any other type of real estate:

    Strip center for multi-family rental
    Vacant lot for improved property
    Improvements on property not already owned
    Oil, gas and other mineral interests
    Water rights
    Cell tower, billboard and fiber optic cable easements
    Conservation easements

    The Regulations also require the replacement property be located within the United States and some of its territories and possessions to qualify as like-kind for property sold in the United States. For example, a taxpayer cannot use proceeds from the sale of an office building in Dallas to acquire an investment property in Mexico. While a Mexican condominium investment sounds like a great retirement plan after the extended rental period is over, it’s not going to pass muster with the IRS when it comes to Section 1031. Property located outside the United States is like-kind only to other property located outside of the United States.
    Like-Kind Requirements Takeaways

    Like-kind real estate are assets of the same nature or character, irrespective of class or quality that can be exchanged without realizing tax liability under Section 1031
    Properties must be held use in a trade or business, or investment purposes but do not need to be similar in class or quality
    Any type of real estate is like-kind to any other real estate interest
    Many non-traditional real estate interests are like-kind to conventional interests
    Properties must be in the United States and some US territories and possessions in order to qualify as like-kind to other properties in the United States

    https://cta-redirect.hubspot.com/cta/redirect/6205670/3affec8d-f739-49b… alt=”free download: understanding a like-kind exchange” class=”hs-cta-img” height=”150″ id=”hs-cta-img-3affec8d-f739-49b0-a02b-d35ffc3abed1″ src=”https://no-cache.hubspot.com/cta/default/6205670/3affec8d-f739-49b0-a02…; style=”border-width:0px;” width=”1320″ />https://js.hscta.net/cta/current.js”> hbspt.cta.load(6205670, ‘3affec8d-f739-49b0-a02b-d35ffc3abed1’, {});
     
    Be sure to discuss 1031 exchange plans with a trusted Qualified Intermediary such as Accruit. Following the like-kind requirements is just one of several rules that must be adhered to in order to complete a successful

  • Understanding the “Like-Kind” Requirement in 1031 Exchanges

    There are many requirements to ensure for a compliant 1031 exchange. One frequently posed question by potential exchangers pertains to what property is considered “like-kind” to another property. It relates to the term “like-kind” referring to two real estate assets of a similar nature irrespective of class or quality, that (if exchanged by the rules) can be replaced without realizing any taxable gain.
    The Internal Revenue Code (IRC) Section 1031 defines like-kind property as any property held for investment or use in a trade or business. The relinquished property and the replacement must be of like-kind to qualify for exchange treatment. Put simply, both properties involved in the exchange must be for use in a trade or business, or investment purposes. So, for example, although a personal residence or a vacation home is real estate, since it is held for personal use and not for investment, it would not qualify for exchange treatment. Property held as part of a dealer’s or developer’s inventory also does not qualify.
    What is “Like-Kind”? 
    The rules provide that the words “like-kind” reference the nature or character of the property and not its class or quality. Under the Regulations, things to consider include “the respective interests in the physical properties, the nature of the title conveyed, the rights of the parties, and the duration of the interests.” Based on these provisions, like-kind is defined in the tax code quite liberally in that any real estate is like- kind to any other type of real estate. For example, whether the real estate is improved or unimproved is not significant. Many court cases and rulings have addressed the like-kind standard for real property. Regulations provide examples of like-kind real property, some of which are obvious, others less so. Below are examples of real property interests that can be exchanged for any other type of real estate:

    Strip center for multi-family rental
    Vacant lot for improved property
    Improvements on property not already owned
    Oil, gas and other mineral interests
    Water rights
    Cell tower, billboard and fiber optic cable easements
    Conservation easements

    The Regulations also require the replacement property be located within the United States and some of its territories and possessions to qualify as like-kind for property sold in the United States. For example, a taxpayer cannot use proceeds from the sale of an office building in Dallas to acquire an investment property in Mexico. While a Mexican condominium investment sounds like a great retirement plan after the extended rental period is over, it’s not going to pass muster with the IRS when it comes to Section 1031. Property located outside the United States is like-kind only to other property located outside of the United States.
    Like-Kind Requirements Takeaways

    Like-kind real estate are assets of the same nature or character, irrespective of class or quality that can be exchanged without realizing tax liability under Section 1031
    Properties must be held use in a trade or business, or investment purposes but do not need to be similar in class or quality
    Any type of real estate is like-kind to any other real estate interest
    Many non-traditional real estate interests are like-kind to conventional interests
    Properties must be in the United States and some US territories and possessions in order to qualify as like-kind to other properties in the United States

    https://cta-redirect.hubspot.com/cta/redirect/6205670/3affec8d-f739-49b… alt=”free download: understanding a like-kind exchange” class=”hs-cta-img” height=”150″ id=”hs-cta-img-3affec8d-f739-49b0-a02b-d35ffc3abed1″ src=”https://no-cache.hubspot.com/cta/default/6205670/3affec8d-f739-49b0-a02…; style=”border-width:0px;” width=”1320″ />https://js.hscta.net/cta/current.js”> hbspt.cta.load(6205670, ‘3affec8d-f739-49b0-a02b-d35ffc3abed1’, {});
     
    Be sure to discuss 1031 exchange plans with a trusted Qualified Intermediary such as Accruit. Following the like-kind requirements is just one of several rules that must be adhered to in order to complete a successful

  • Understanding the “Like-Kind” Requirement in 1031 Exchanges

    There are many requirements to ensure for a compliant 1031 exchange. One frequently posed question by potential exchangers pertains to what property is considered “like-kind” to another property. It relates to the term “like-kind” referring to two real estate assets of a similar nature irrespective of class or quality, that (if exchanged by the rules) can be replaced without realizing any taxable gain.
    The Internal Revenue Code (IRC) Section 1031 defines like-kind property as any property held for investment or use in a trade or business. The relinquished property and the replacement must be of like-kind to qualify for exchange treatment. Put simply, both properties involved in the exchange must be for use in a trade or business, or investment purposes. So, for example, although a personal residence or a vacation home is real estate, since it is held for personal use and not for investment, it would not qualify for exchange treatment. Property held as part of a dealer’s or developer’s inventory also does not qualify.
    What is “Like-Kind”? 
    The rules provide that the words “like-kind” reference the nature or character of the property and not its class or quality. Under the Regulations, things to consider include “the respective interests in the physical properties, the nature of the title conveyed, the rights of the parties, and the duration of the interests.” Based on these provisions, like-kind is defined in the tax code quite liberally in that any real estate is like- kind to any other type of real estate. For example, whether the real estate is improved or unimproved is not significant. Many court cases and rulings have addressed the like-kind standard for real property. Regulations provide examples of like-kind real property, some of which are obvious, others less so. Below are examples of real property interests that can be exchanged for any other type of real estate:

    Strip center for multi-family rental
    Vacant lot for improved property
    Improvements on property not already owned
    Oil, gas and other mineral interests
    Water rights
    Cell tower, billboard and fiber optic cable easements
    Conservation easements

    The Regulations also require the replacement property be located within the United States and some of its territories and possessions to qualify as like-kind for property sold in the United States. For example, a taxpayer cannot use proceeds from the sale of an office building in Dallas to acquire an investment property in Mexico. While a Mexican condominium investment sounds like a great retirement plan after the extended rental period is over, it’s not going to pass muster with the IRS when it comes to Section 1031. Property located outside the United States is like-kind only to other property located outside of the United States.
    Like-Kind Requirements Takeaways

    Like-kind real estate are assets of the same nature or character, irrespective of class or quality that can be exchanged without realizing tax liability under Section 1031
    Properties must be held use in a trade or business, or investment purposes but do not need to be similar in class or quality
    Any type of real estate is like-kind to any other real estate interest
    Many non-traditional real estate interests are like-kind to conventional interests
    Properties must be in the United States and some US territories and possessions in order to qualify as like-kind to other properties in the United States

    https://cta-redirect.hubspot.com/cta/redirect/6205670/3affec8d-f739-49b… alt=”free download: understanding a like-kind exchange” class=”hs-cta-img” height=”150″ id=”hs-cta-img-3affec8d-f739-49b0-a02b-d35ffc3abed1″ src=”https://no-cache.hubspot.com/cta/default/6205670/3affec8d-f739-49b0-a02…; style=”border-width:0px;” width=”1320″ />https://js.hscta.net/cta/current.js”> hbspt.cta.load(6205670, ‘3affec8d-f739-49b0-a02b-d35ffc3abed1’, {});
     
    Be sure to discuss 1031 exchange plans with a trusted Qualified Intermediary such as Accruit. Following the like-kind requirements is just one of several rules that must be adhered to in order to complete a successful