Development

Tag: 1031 tax exchange

  • Leveraging Technology in a 1031 Exchange

    Executing a 1031 exchange properly can range from the simple to the complex depending on a variety of issues such as property type, property use, vesting and so on. To this day, however, the vast majority of Qualified Intermediaries processing 1031 exchange technology, Accruit developed and patented Exchange Manager Pro℠ (EMP) software initially as an internal 1031 exchange processing software to gain efficiencies, create internal controls, increase security and drive the customer experience higher.   

    Efficiencies: It is estimated that Exchange Manager Pro℠ from Accruit can increase the number of exchanges processed per person by 2-3x a paper-based system.
    Internal Controls: Exchange Manager Pro℠ is built on a 1031 Managed Services clients can take advantage of either the 1031 exchange automation or licensing EMP as a 1031 software application depending on their unique needs.
    Software automation clients can take advantage of the increased efficiencies of Exchange Manager Pro℠ coupled with the depth of knowledge of Accruit. For example, a title company may wish to monetize their Accruit’s Managed Services platform contact us at info@accruit.com or (800) 237-1031 today!

     

  • Leveraging Technology in a 1031 Exchange

    Executing a 1031 exchange properly can range from the simple to the complex depending on a variety of issues such as property type, property use, vesting and so on. To this day, however, the vast majority of Qualified Intermediaries processing 1031 exchange technology, Accruit developed and patented Exchange Manager Pro℠ (EMP) software initially as an internal 1031 exchange processing software to gain efficiencies, create internal controls, increase security and drive the customer experience higher.   

    Efficiencies: It is estimated that Exchange Manager Pro℠ from Accruit can increase the number of exchanges processed per person by 2-3x a paper-based system.
    Internal Controls: Exchange Manager Pro℠ is built on a 1031 Managed Services clients can take advantage of either the 1031 exchange automation or licensing EMP as a 1031 software application depending on their unique needs.
    Software automation clients can take advantage of the increased efficiencies of Exchange Manager Pro℠ coupled with the depth of knowledge of Accruit. For example, a title company may wish to monetize their Accruit’s Managed Services platform contact us at info@accruit.com or (800) 237-1031 today!

     

  • Leveraging Technology in a 1031 Exchange

    Executing a 1031 exchange properly can range from the simple to the complex depending on a variety of issues such as property type, property use, vesting and so on. To this day, however, the vast majority of Qualified Intermediaries processing 1031 exchange technology, Accruit developed and patented Exchange Manager Pro℠ (EMP) software initially as an internal 1031 exchange processing software to gain efficiencies, create internal controls, increase security and drive the customer experience higher.   

    Efficiencies: It is estimated that Exchange Manager Pro℠ from Accruit can increase the number of exchanges processed per person by 2-3x a paper-based system.
    Internal Controls: Exchange Manager Pro℠ is built on a 1031 Managed Services clients can take advantage of either the 1031 exchange automation or licensing EMP as a 1031 software application depending on their unique needs.
    Software automation clients can take advantage of the increased efficiencies of Exchange Manager Pro℠ coupled with the depth of knowledge of Accruit. For example, a title company may wish to monetize their Accruit’s Managed Services platform contact us at info@accruit.com or (800) 237-1031 today!

     

  • Is Your 1031 Exchange Straddling Two Tax Years?

    Most users of Section 1031 understand the 180-calendar day deadline to complete their like-kind exchange.  This general understanding of the exchange period deadline is fine for most transactions, but many exchangers remain unaware of the more nuanced definition of this critical period.
    What do the regulations say?
    Section 1031’s underlying regulations state, “The exchange period begins on the date the taxpayer transfers the relinquished property and ends at midnight on the earlier of the 180th day thereafter or the due date (including extensions) for the taxpayer’s return of tax imposed by chapter 1 of subtitle A of the Code for the taxable year in which the transfer of the relinquished property occurs.”
    What do the regulations mean?
    The regulations generally allow for 180 calendar days for taxpayers to complete their 1031 exchanges that straddle tax years, taxpayers may seek installment tax reporting on IRS Form 6252 in the year of the relinquished property sale.  For instance, if the relinquished property closed between November 16 and December 31, the 45-day identification would be in the following calendar year.  Similarly, if the relinquished property closed after July 5, and potential replacement property was identified within the 45-day identification period but no replacement property was actually acquired, the end of the exchange period would be in the following calendar year.  If the 1031 exchange fails by non-identification or by failure to purchase a replacement property, the sale proceeds would be returned to the exchanger in a different tax reporting year.  In this circumstance, the IRS allows taxpayers to either report the gain in the year of sale or in the year the proceeds were received under IRC 453 installment sale rules.  This would allow the taxpayer to select the year of reporting that is most beneficial.  One might say that a year’s worth of tax deferral is available regardless of the exchange having failed.
    Taxpayers Beware
    Installment sale treatment generally requires a bona fide intent to complete an exchange.  This means that the taxpayer had reason to believe, based on the facts and circumstances at the beginning of the exchange, that a like-kind replacement property would be acquired during the exchange period.
    Other installment sale issues:

    If there was debt paid off at closing of the relinquished property and gain associated with this debt, relief is generally recognized in the year of sale. 
    Depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale.
    Interest is charged on the tax deferred if the sale price of the relinquished property is over $150,000 and certain other instalment obligations exceed $5 million.

    For taxpayers who have a taxable gain, there is one additional issue to consider.  If you are unsettled about current tax rates, you may extend your tax return to report by October 15.  This way, you can wait and see if the Congress will change the rates and select the year of reporting that is most beneficial for you.
    Check with your tax advisor to determine the correct tax forms and tax extensions to utilize along with the selection of the reporting year for your exchange.

  • Is Your 1031 Exchange Straddling Two Tax Years?

    Most users of Section 1031 understand the 180-calendar day deadline to complete their like-kind exchange.  This general understanding of the exchange period deadline is fine for most transactions, but many exchangers remain unaware of the more nuanced definition of this critical period.
    What do the regulations say?
    Section 1031’s underlying regulations state, “The exchange period begins on the date the taxpayer transfers the relinquished property and ends at midnight on the earlier of the 180th day thereafter or the due date (including extensions) for the taxpayer’s return of tax imposed by chapter 1 of subtitle A of the Code for the taxable year in which the transfer of the relinquished property occurs.”
    What do the regulations mean?
    The regulations generally allow for 180 calendar days for taxpayers to complete their 1031 exchanges that straddle tax years, taxpayers may seek installment tax reporting on IRS Form 6252 in the year of the relinquished property sale.  For instance, if the relinquished property closed between November 16 and December 31, the 45-day identification would be in the following calendar year.  Similarly, if the relinquished property closed after July 5, and potential replacement property was identified within the 45-day identification period but no replacement property was actually acquired, the end of the exchange period would be in the following calendar year.  If the 1031 exchange fails by non-identification or by failure to purchase a replacement property, the sale proceeds would be returned to the exchanger in a different tax reporting year.  In this circumstance, the IRS allows taxpayers to either report the gain in the year of sale or in the year the proceeds were received under IRC 453 installment sale rules.  This would allow the taxpayer to select the year of reporting that is most beneficial.  One might say that a year’s worth of tax deferral is available regardless of the exchange having failed.
    Taxpayers Beware
    Installment sale treatment generally requires a bona fide intent to complete an exchange.  This means that the taxpayer had reason to believe, based on the facts and circumstances at the beginning of the exchange, that a like-kind replacement property would be acquired during the exchange period.
    Other installment sale issues:

    If there was debt paid off at closing of the relinquished property and gain associated with this debt, relief is generally recognized in the year of sale. 
    Depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale.
    Interest is charged on the tax deferred if the sale price of the relinquished property is over $150,000 and certain other instalment obligations exceed $5 million.

    For taxpayers who have a taxable gain, there is one additional issue to consider.  If you are unsettled about current tax rates, you may extend your tax return to report by October 15.  This way, you can wait and see if the Congress will change the rates and select the year of reporting that is most beneficial for you.
    Check with your tax advisor to determine the correct tax forms and tax extensions to utilize along with the selection of the reporting year for your exchange.

  • Is Your 1031 Exchange Straddling Two Tax Years?

    Most users of Section 1031 understand the 180-calendar day deadline to complete their like-kind exchange.  This general understanding of the exchange period deadline is fine for most transactions, but many exchangers remain unaware of the more nuanced definition of this critical period.
    What do the regulations say?
    Section 1031’s underlying regulations state, “The exchange period begins on the date the taxpayer transfers the relinquished property and ends at midnight on the earlier of the 180th day thereafter or the due date (including extensions) for the taxpayer’s return of tax imposed by chapter 1 of subtitle A of the Code for the taxable year in which the transfer of the relinquished property occurs.”
    What do the regulations mean?
    The regulations generally allow for 180 calendar days for taxpayers to complete their 1031 exchanges that straddle tax years, taxpayers may seek installment tax reporting on IRS Form 6252 in the year of the relinquished property sale.  For instance, if the relinquished property closed between November 16 and December 31, the 45-day identification would be in the following calendar year.  Similarly, if the relinquished property closed after July 5, and potential replacement property was identified within the 45-day identification period but no replacement property was actually acquired, the end of the exchange period would be in the following calendar year.  If the 1031 exchange fails by non-identification or by failure to purchase a replacement property, the sale proceeds would be returned to the exchanger in a different tax reporting year.  In this circumstance, the IRS allows taxpayers to either report the gain in the year of sale or in the year the proceeds were received under IRC 453 installment sale rules.  This would allow the taxpayer to select the year of reporting that is most beneficial.  One might say that a year’s worth of tax deferral is available regardless of the exchange having failed.
    Taxpayers Beware
    Installment sale treatment generally requires a bona fide intent to complete an exchange.  This means that the taxpayer had reason to believe, based on the facts and circumstances at the beginning of the exchange, that a like-kind replacement property would be acquired during the exchange period.
    Other installment sale issues:

    If there was debt paid off at closing of the relinquished property and gain associated with this debt, relief is generally recognized in the year of sale. 
    Depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale.
    Interest is charged on the tax deferred if the sale price of the relinquished property is over $150,000 and certain other instalment obligations exceed $5 million.

    For taxpayers who have a taxable gain, there is one additional issue to consider.  If you are unsettled about current tax rates, you may extend your tax return to report by October 15.  This way, you can wait and see if the Congress will change the rates and select the year of reporting that is most beneficial for you.
    Check with your tax advisor to determine the correct tax forms and tax extensions to utilize along with the selection of the reporting year for your exchange.

  • How to Choose a Qualified Intermediary for your 1031 Exchange

    There is an old adage that states “Just because you can do something-doesn’t mean you should.” This sage advice certainly applies to choosing a qualified intermediary to facilitate a 1031 like-kind exchange. The use of a qualified intermediary is essential to completing a successful 1031 exchange because, while the process of completing an exchange is straightforward, the rules are complicated and loaded with potential pitfalls for the exchanger if the exchange is not properly prepared.
    To simplify the discussion and underscore the potential challenges of selecting a qualified intermediary, let’s identify parties who cannot act as a qualified intermediary. This list is relatively short and essentially disqualifies those who have acted in some advisory capacity for your company during the two years prior to a potential exchange:

    Related Parties – Including certain family members and business entities with shared/common ownership.
    Agents – Including individuals that have provided services to the exchanging taxpayer as an employee, attorney, accountant, investment banker or broker within the two year period ending on the date of the transfer of the first of the relinquished properties.

    Aside from the above, virtually anyone can legally act in the capacity of a qualified intermediary, and therein lies the potential for disaster.
    I spoke about 1031 exchanges recently at a conference where one of the attendees, an equipment dealer who had advised a customer on their like-kind exchange, stated his belief that the only requirement for a qualified intermediary was that they be a third party who could hold the money from the sale of the relinquished equipment until the seller requires the money for the purchase of replacement property.
    While it’s true that any third party can legally provide the service outlined above, they’ll likely fall short of providing a properly-structured 1031 exchange that satisfies the Internal Revenue Service’s safe harbor guidelines. I inquired further:

    Did the selling party execute an Exchange Agreement outlining the safe harbor compliance rules? Without specific restrictions on the sales proceeds contained in this agreement, the exchanger still has constructive receipt of funds from the sale.
    Did the third party create a separate bank account for the specific benefit of the seller/exchanger during the exchange period?
    Did the seller notify the buyer that they had assigned their interests and rights in the sold equipment to the qualified intermediary?
    Did your customer notify the seller that he had assigned his interests and rights in the new equipment to the qualified intermediary?
    Did your customer send a Replacement Property Identification Notice to the qualified intermediary before the expiration of the identification period, identifying the equipment the buyer planned on purchasing by one of the two approved methods?
    Did you (the equipment store) notify the customer that he had 45 days to identify potential replacement equipment and up to 180 days from the sale of the used equipment to purchase the new replacement equipment?
    Did you provide all of the documentation and signatures required by the Treasury to ensure that the seller indeed satisfied the IRC safe harbor compliance rules and regulations?

    When the color returned to his face and the nausea had passed, the equipment dealer uttered the far too common response of someone who had purported to serve as a qualified intermediary but was not one.  “All we did was hold the money and then forward it to the seller when it came time to buy.”
    Like-kind exchanges offer sellers of used equipment a tremendous opportunity to reinvest in funds that would otherwise be lost to taxes, but in order to enjoy this benefit exchangers must follow a document and deadline driven process. When engaging a qualified intermediary, be certain that they understand the necessary documents, steps, and safe harbors that are inherent in Section 1031. Doing so will result in a properly-structured and secure exchange.
    https://info.accruit.com/start-an-exchange”>

     
     
     

  • How to Choose a Qualified Intermediary for your 1031 Exchange

    There is an old adage that states “Just because you can do something-doesn’t mean you should.” This sage advice certainly applies to choosing a qualified intermediary to facilitate a 1031 like-kind exchange. The use of a qualified intermediary is essential to completing a successful 1031 exchange because, while the process of completing an exchange is straightforward, the rules are complicated and loaded with potential pitfalls for the exchanger if the exchange is not properly prepared.
    To simplify the discussion and underscore the potential challenges of selecting a qualified intermediary, let’s identify parties who cannot act as a qualified intermediary. This list is relatively short and essentially disqualifies those who have acted in some advisory capacity for your company during the two years prior to a potential exchange:

    Related Parties – Including certain family members and business entities with shared/common ownership.
    Agents – Including individuals that have provided services to the exchanging taxpayer as an employee, attorney, accountant, investment banker or broker within the two year period ending on the date of the transfer of the first of the relinquished properties.

    Aside from the above, virtually anyone can legally act in the capacity of a qualified intermediary, and therein lies the potential for disaster.
    I spoke about 1031 exchanges recently at a conference where one of the attendees, an equipment dealer who had advised a customer on their like-kind exchange, stated his belief that the only requirement for a qualified intermediary was that they be a third party who could hold the money from the sale of the relinquished equipment until the seller requires the money for the purchase of replacement property.
    While it’s true that any third party can legally provide the service outlined above, they’ll likely fall short of providing a properly-structured 1031 exchange that satisfies the Internal Revenue Service’s safe harbor guidelines. I inquired further:

    Did the selling party execute an Exchange Agreement outlining the safe harbor compliance rules? Without specific restrictions on the sales proceeds contained in this agreement, the exchanger still has constructive receipt of funds from the sale.
    Did the third party create a separate bank account for the specific benefit of the seller/exchanger during the exchange period?
    Did the seller notify the buyer that they had assigned their interests and rights in the sold equipment to the qualified intermediary?
    Did your customer notify the seller that he had assigned his interests and rights in the new equipment to the qualified intermediary?
    Did your customer send a Replacement Property Identification Notice to the qualified intermediary before the expiration of the identification period, identifying the equipment the buyer planned on purchasing by one of the two approved methods?
    Did you (the equipment store) notify the customer that he had 45 days to identify potential replacement equipment and up to 180 days from the sale of the used equipment to purchase the new replacement equipment?
    Did you provide all of the documentation and signatures required by the Treasury to ensure that the seller indeed satisfied the IRC safe harbor compliance rules and regulations?

    When the color returned to his face and the nausea had passed, the equipment dealer uttered the far too common response of someone who had purported to serve as a qualified intermediary but was not one.  “All we did was hold the money and then forward it to the seller when it came time to buy.”
    Like-kind exchanges offer sellers of used equipment a tremendous opportunity to reinvest in funds that would otherwise be lost to taxes, but in order to enjoy this benefit exchangers must follow a document and deadline driven process. When engaging a qualified intermediary, be certain that they understand the necessary documents, steps, and safe harbors that are inherent in Section 1031. Doing so will result in a properly-structured and secure exchange.
    https://info.accruit.com/start-an-exchange”>

     
     
     

  • How to Choose a Qualified Intermediary for your 1031 Exchange

    There is an old adage that states “Just because you can do something-doesn’t mean you should.” This sage advice certainly applies to choosing a qualified intermediary to facilitate a 1031 like-kind exchange. The use of a qualified intermediary is essential to completing a successful 1031 exchange because, while the process of completing an exchange is straightforward, the rules are complicated and loaded with potential pitfalls for the exchanger if the exchange is not properly prepared.
    To simplify the discussion and underscore the potential challenges of selecting a qualified intermediary, let’s identify parties who cannot act as a qualified intermediary. This list is relatively short and essentially disqualifies those who have acted in some advisory capacity for your company during the two years prior to a potential exchange:

    Related Parties – Including certain family members and business entities with shared/common ownership.
    Agents – Including individuals that have provided services to the exchanging taxpayer as an employee, attorney, accountant, investment banker or broker within the two year period ending on the date of the transfer of the first of the relinquished properties.

    Aside from the above, virtually anyone can legally act in the capacity of a qualified intermediary, and therein lies the potential for disaster.
    I spoke about 1031 exchanges recently at a conference where one of the attendees, an equipment dealer who had advised a customer on their like-kind exchange, stated his belief that the only requirement for a qualified intermediary was that they be a third party who could hold the money from the sale of the relinquished equipment until the seller requires the money for the purchase of replacement property.
    While it’s true that any third party can legally provide the service outlined above, they’ll likely fall short of providing a properly-structured 1031 exchange that satisfies the Internal Revenue Service’s safe harbor guidelines. I inquired further:

    Did the selling party execute an Exchange Agreement outlining the safe harbor compliance rules? Without specific restrictions on the sales proceeds contained in this agreement, the exchanger still has constructive receipt of funds from the sale.
    Did the third party create a separate bank account for the specific benefit of the seller/exchanger during the exchange period?
    Did the seller notify the buyer that they had assigned their interests and rights in the sold equipment to the qualified intermediary?
    Did your customer notify the seller that he had assigned his interests and rights in the new equipment to the qualified intermediary?
    Did your customer send a Replacement Property Identification Notice to the qualified intermediary before the expiration of the identification period, identifying the equipment the buyer planned on purchasing by one of the two approved methods?
    Did you (the equipment store) notify the customer that he had 45 days to identify potential replacement equipment and up to 180 days from the sale of the used equipment to purchase the new replacement equipment?
    Did you provide all of the documentation and signatures required by the Treasury to ensure that the seller indeed satisfied the IRC safe harbor compliance rules and regulations?

    When the color returned to his face and the nausea had passed, the equipment dealer uttered the far too common response of someone who had purported to serve as a qualified intermediary but was not one.  “All we did was hold the money and then forward it to the seller when it came time to buy.”
    Like-kind exchanges offer sellers of used equipment a tremendous opportunity to reinvest in funds that would otherwise be lost to taxes, but in order to enjoy this benefit exchangers must follow a document and deadline driven process. When engaging a qualified intermediary, be certain that they understand the necessary documents, steps, and safe harbors that are inherent in Section 1031. Doing so will result in a properly-structured and secure exchange.
    https://info.accruit.com/start-an-exchange”>