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Drawing your own conclusions

By JENNY CASTRO, for 1031exchangefaq.com 8/17/2007

Even for those transactions that don't qualify for the safe harbor, the IRS no-inference rule leaves the door open for other arrangements. The dominant estates got a significantly higher share of the surplus because they could start the bargaining with a bid that only included compensation for cost, whereas the servient estate could not find any principle that would give them the whole surplus. The rules, however, are different for rolling over profits (called 1031 exchanges, for the section of the tax code that allows them) from the sale of rental property than the old rules for a primary residence. When the taxpayer later is prepared to dispose of the relinquished property a three party exchange occurs whereby the accommodation party exchanges the replacement property for the relinquished property and then sells the relinquished property. There is one important issue to be aware of when exchanging from mineral interests into hard real estate. An example of this type of lease would be a retailer leasing back the building it formerly owned and still running the store. It is a hybrid of the common installment sale and a structured annuity, and it enables the seller to collect a stream of payments, leverage equity, earn a pre-tax return, and other benefits.A 1031 exchange allows for the deferment of Federal, and in most cases state, capital gain and depreciation recapture taxes in real estate dealings. With low minimum purchase amounts and unlimited appreciation potential, purchasing TIC interests in undeveloped land may be the opportunity you have been looking for to build wealth, diversify your holdings, or to get into the ground floor of investment real estate.In order to obtain full benefit, the replacement property must be of equal or greater value, and all of the proceeds from the relinquished property must be used to acquire the replacement property.

Disadvantages

One is to provide a search-theoretical model of the marketing choice of the seller. The IRS has made like-kind exchanges of qualified property an even more attractive and flexible tax-planning tool with a safe harbor for reverse like-kind exchanges. They have simply not existed for modest-sized investments, until now. In a nutshell, the investment power of your equity is not diluted by taxes in 1031 exchanges. Even worse is the way the government defines your gain.Combining Section 121 with Section 1031 within one transaction is actually a simple process provided the proper guidelines are followed.

Finding the right 1031 exchange property

You have probably realized good returns on investment that will otherwise be lost to the IRS. In a gross lease, the tenant pays a gross amount of rent, which the landlord can use to pay expenses or in any other way as the landlord sees fit. As their popularity has increased, so has the amount of information and more specifically, mis-information about them. The taxpayer usually receives many of the benefits of ownership by, for example, leasing it under a triple net lease. These leases are not terminable by the tenant, nor are rent abatements permissible. Where a taxpayer wishes to construct improvements on the replacement property as part of the exchange, the 180-day period is frequently inadequate to complete the construction. "Roof and structure" is sometimes calculated as a reserve, the most common amount is equal to $ .15 per square foot. The IRS limits the number of properties you may identify.

Buyer beware

This finding is consistent with the belief that financial assets are informationally opaque and, therefore, uniquely difficult to value. In a gross lease, the tenant pays a gross amount of rent, which the landlord can use to pay expenses or in any other way as the landlord sees fit. Failure to close is the top reason clients reveal as to why they pay capital gains. Likewise, the improvements must be completed and title conveyed by the EAT to the Exchanger within the earlier of 180 calendar days from the close of the relinquished property or the tax filing date for the Exchanger - assuming no automatic extension has been applied for. The same could be true for state and local tax purposes. The term "boot" refers to anything that is exchanged in a 1031 exchange that is not like-kind property. Intertemporally, REIT returns are much more strongly related to unsecuritized real estate than stocks or closed-end funds.1031 Exchange provides detailed information on 1031 exchange, 1031 exchange companies, 1031 exchange experts, 1031 exchange forms and more.