Development

Tag: section 1031

  • Preserve Your Agricultural Assets with 1031 Exchange

    Preserve Your Agricultural Assets with 1031 Exchange

    Like-kind exchanges provide benefits to sellers of agricultural property under 1031 like-kind exchange. The fact is you can buy any real property such as farm, ranch, apartment complex, commercial building, or rental home used for trade, investment, or businesses purposes. These rules allow agricultural property owners to diversify their investments and grow a wider range of assets. Without 1031 tax deferred exchange, agricultural property owners will be held responsible for paying taxes on the property being sold, even if they reinvest and purchase new property.
    What can Agricultural Property Owners Exchange with 1031?
    Agricultural property owners can exchange labor, chemical, and water intensive land into less management intensive property such as residential or office condominiums. Or they can exchange conservation easements on their ranch land to acquire new property.
    For example:
    Recently a client sold two easements on his agricultural land. One of the easements restricted his ability to use the wells on his land. This helps keep water in the underground aquifers and permits more water to flow further downstream for other users. The second easement restricted his ability to use chemical fertilizers on his land. The societal benefit here is that fewer chemicals being applied to the land mean fewer chemicals running into the streams, polluted the water, and killing the fish. The cash generated by the sale of the easements was used to acquire a few single-family homes nearby, which will be used as VRBO/Airbnb type rentals.
     
    Time is of the essence when it comes to Selling and Obtaining Real Property
    Timing is crucial when it comes to selling and acquiring real property in a Section 1031 gives the seller 180-days to replace their property when exchanging into another real property.
    Why am I doing a 1031 tax deferred exchange?

    Diversify your portfolio

    Rather than having all of your funds locked into one large property, you can reinvest into multiple properties of different asset classes (residential, commercial, retail, etc.).
    Rather than having all of your funds locked into one location, you can reinvest across town, or across the country, to take advantage of stronger opportunities.
    Spread assets into smaller investments as party of an estate plan.

    Upgrade or consolidate your portfolio

    Rather than having your investments scattered across the county, consolidate into fewer, larger properties.

    For more information, https://www.accruit.com/contact-us”>contact Accruit and subscribe to our https://www.accruit.com/blog/”>blog

  • 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 

  • The Myth of the 1031 Exchange Cooperation Clause

    In this post, we will take a brief look into the evolution of Section 1031 to show why it was critical along the way to make use of an “Exchange Cooperation Clause” and why, as the rules changed over time, such use is no longer necessary.
    The Starker case
    Section 1031 made its way into the Tax Code in 1921, nearly a hundred years ago. At that time, until the mid-1980s, the sale and purchase were thought to need to take place “simultaneously”, after all, isn’t that the commonsense definition of a trade between two people? Apparently not. Beginning in the late 1970s and continuing into the mid-1980s, in the landmark case of Starker vs. U.S., it was determined by a Federal District Court in California that there did not appear to be any requirement in the plain language of Section 1031 of simultaneity.

    “No gain or loss is recognized if property held for productive use in a trade or business or for investment is exchanged solely for property of a like kind to be held either for productive use in a trade or business or for investment”.

    This seemingly innocuous ruling opened up a Pandora’s Box of opportunity, not to mention confusion. The period of time for completing the trade with his buyer in the Starker case was five years. In 1986, shortly after the decision came out, Congress chose a legislative fix. It agreed that Section 1031 did not require the exchange of the properties to take place at the same time but decided to limit the open ended duration to complete the trade of the one for the other to 180 days. Essentially that limited time period still allowed the two transactions to be close enough in time to be considered to be tied to one another. But anything of a longer period simply broke the link between the sale and the purchase into unrelated (for tax purposes) transactions.
    Identification and purchase period to qualify for 1031 exchange
    As for the opportunity presented, taxpayers had

  • The Myth of the 1031 Exchange Cooperation Clause

    In this post, we will take a brief look into the evolution of Section 1031 to show why it was critical along the way to make use of an “Exchange Cooperation Clause” and why, as the rules changed over time, such use is no longer necessary.
    The Starker case
    Section 1031 made its way into the Tax Code in 1921, nearly a hundred years ago. At that time, until the mid-1980s, the sale and purchase were thought to need to take place “simultaneously”, after all, isn’t that the commonsense definition of a trade between two people? Apparently not. Beginning in the late 1970s and continuing into the mid-1980s, in the landmark case of Starker vs. U.S., it was determined by a Federal District Court in California that there did not appear to be any requirement in the plain language of Section 1031 of simultaneity.

    “No gain or loss is recognized if property held for productive use in a trade or business or for investment is exchanged solely for property of a like kind to be held either for productive use in a trade or business or for investment”.

    This seemingly innocuous ruling opened up a Pandora’s Box of opportunity, not to mention confusion. The period of time for completing the trade with his buyer in the Starker case was five years. In 1986, shortly after the decision came out, Congress chose a legislative fix. It agreed that Section 1031 did not require the exchange of the properties to take place at the same time but decided to limit the open ended duration to complete the trade of the one for the other to 180 days. Essentially that limited time period still allowed the two transactions to be close enough in time to be considered to be tied to one another. But anything of a longer period simply broke the link between the sale and the purchase into unrelated (for tax purposes) transactions.
    Identification and purchase period to qualify for 1031 exchange
    As for the opportunity presented, taxpayers had

  • The Myth of the 1031 Exchange Cooperation Clause

    In this post, we will take a brief look into the evolution of Section 1031 to show why it was critical along the way to make use of an “Exchange Cooperation Clause” and why, as the rules changed over time, such use is no longer necessary.
    The Starker case
    Section 1031 made its way into the Tax Code in 1921, nearly a hundred years ago. At that time, until the mid-1980s, the sale and purchase were thought to need to take place “simultaneously”, after all, isn’t that the commonsense definition of a trade between two people? Apparently not. Beginning in the late 1970s and continuing into the mid-1980s, in the landmark case of Starker vs. U.S., it was determined by a Federal District Court in California that there did not appear to be any requirement in the plain language of Section 1031 of simultaneity.

    “No gain or loss is recognized if property held for productive use in a trade or business or for investment is exchanged solely for property of a like kind to be held either for productive use in a trade or business or for investment”.

    This seemingly innocuous ruling opened up a Pandora’s Box of opportunity, not to mention confusion. The period of time for completing the trade with his buyer in the Starker case was five years. In 1986, shortly after the decision came out, Congress chose a legislative fix. It agreed that Section 1031 did not require the exchange of the properties to take place at the same time but decided to limit the open ended duration to complete the trade of the one for the other to 180 days. Essentially that limited time period still allowed the two transactions to be close enough in time to be considered to be tied to one another. But anything of a longer period simply broke the link between the sale and the purchase into unrelated (for tax purposes) transactions.
    Identification and purchase period to qualify for 1031 exchange
    As for the opportunity presented, taxpayers had

  • Real Estate Transaction Basics

     No useful reason exists to think of or treat a closing like litigation although it does happen.  Everyone involved needs to work together in a cooperative way to consummate the deal.  Real estate law is a function of locality and custom in many respects; however, we will generally review some commonalities in the closing of a real estate transaction.  
    Most real estate transactions begin with a written contract and end with a closing.  The following parties are typically involved in negotiating, performing and closing on the contract:

    Seller
    Buyer
    Real estate agents
    Attorneys (depending on locality and complexity)
    Lender (if not a cash deal or other financing arrangement)
    Title company

    All agreements for the purchase and sale of real estate must be in writing.  The contract sets forth the conditions under which the seller agrees to transfer and the buyer agrees to purchase the property.  The contract may be lengthy or pithy, complex or straightforward, but its ultimate purpose is to convey ownership of the property to the buyer under mutually agreed upon terms.  
    Occasionally, a real estate transaction may involve an IRC Section 1031 tax-deferred exchange. The tax code and treasury regulations also provide certain rules that address conveying real estate in a tax deferred exchange.  A qualified intermediary (QI) is generally required and is a person or entity that is not a “disqualified person” as defined under the tax code.  For the most part,

  • Real Estate Transaction Basics

     No useful reason exists to think of or treat a closing like litigation although it does happen.  Everyone involved needs to work together in a cooperative way to consummate the deal.  Real estate law is a function of locality and custom in many respects; however, we will generally review some commonalities in the closing of a real estate transaction.  
    Most real estate transactions begin with a written contract and end with a closing.  The following parties are typically involved in negotiating, performing and closing on the contract:

    Seller
    Buyer
    Real estate agents
    Attorneys (depending on locality and complexity)
    Lender (if not a cash deal or other financing arrangement)
    Title company

    All agreements for the purchase and sale of real estate must be in writing.  The contract sets forth the conditions under which the seller agrees to transfer and the buyer agrees to purchase the property.  The contract may be lengthy or pithy, complex or straightforward, but its ultimate purpose is to convey ownership of the property to the buyer under mutually agreed upon terms.  
    Occasionally, a real estate transaction may involve an IRC Section 1031 tax-deferred exchange. The tax code and treasury regulations also provide certain rules that address conveying real estate in a tax deferred exchange.  A qualified intermediary (QI) is generally required and is a person or entity that is not a “disqualified person” as defined under the tax code.  For the most part,

  • Real Estate Transaction Basics

     No useful reason exists to think of or treat a closing like litigation although it does happen.  Everyone involved needs to work together in a cooperative way to consummate the deal.  Real estate law is a function of locality and custom in many respects; however, we will generally review some commonalities in the closing of a real estate transaction.  
    Most real estate transactions begin with a written contract and end with a closing.  The following parties are typically involved in negotiating, performing and closing on the contract:

    Seller
    Buyer
    Real estate agents
    Attorneys (depending on locality and complexity)
    Lender (if not a cash deal or other financing arrangement)
    Title company

    All agreements for the purchase and sale of real estate must be in writing.  The contract sets forth the conditions under which the seller agrees to transfer and the buyer agrees to purchase the property.  The contract may be lengthy or pithy, complex or straightforward, but its ultimate purpose is to convey ownership of the property to the buyer under mutually agreed upon terms.  
    Occasionally, a real estate transaction may involve an IRC Section 1031 tax-deferred exchange. The tax code and treasury regulations also provide certain rules that address conveying real estate in a tax deferred exchange.  A qualified intermediary (QI) is generally required and is a person or entity that is not a “disqualified person” as defined under the tax code.  For the most part,