Current trends of 1031 exchange and Info (1)

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1031 Exchanges

PRESENTED BY Angilina Taylor Exchange
Specialist 1031 sponsors.com
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ABOUT My Company

• Exchange Specialist
• Over 15 years in 1031 industry
• Involved in exchanges of various size and
  complexity

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TODAYS in 1031 Exchange exchang

• Current 1031 trends
• Anticipated 1031 activity over next decade
• Quick overview of 1031 exchanges
• Using your 1031 knowledge to your advantage
• Selecting a Qualified Intermediary (QI)
• FAQ 1031 exchange

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1031 EXCHANGE

• WHAT IS A 1031 EXCHANGE?
• A 1031 exchange (IRS Code Section 1031) gives an
  option to the investor by reinvesting the
  proceeds from the sale of investment property
  (known as the relinquished property) into
  qualified replacement property to defer capital
  gains tax.
• Not for primary residences, flips or most
  vacation homes.

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1031 BENEFITS
Immediate Tax Avoidance Time Value of Deferral Increased cash flow/Income Increased purchasing power Increased ROI Less Management CONSOLIDATION DIVERSIFICATION Future conversion to primary residence or vacation home Possible elimination of gain
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The Power of a 1031 Exchange

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TAX FACTS AND RATES

• CAPITAL GAINS
• 20 for taxpayers with ordinary incomes exceeding
  400,000 (450,000 for married taxpayers)
• 15 for incomes more than approx. 36,000
  (71,000 for married taxpayers) and less than
  400,000 (450,000 for married taxpayers)
• 0 for incomes less than approx. 36,000 (71,000
  for married taxpayers)
• Consult tax advisor to determine actual tax
  rates.

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STATE INCOME TAX

• Each state has different rules regarding
  exchanges.
• Pennsylvania generally does NOT recognize a
  1031 exchange.
• Many states simply follow the Federal Code or
  have adopted similar regulations
• Some states have special requirements such as
  the replacement property must be located
  within the state

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CURRENT TRENDS

• Triple Net PROPERTIES
• Investors are taking advantage of current CRE
  market opportunities and historically low
  interest rates to leverage into several
  replacement properties

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• SHORT EXCHANGE PERIODS
• Exchangers are lining up their replacement
  property and are ready to acquire it immediately
  after conveying the old property to a buyer
• Average exchange is now completed within 45 days
  (down from average of 180 days just two years
  ago)

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REVERSE EXCHANGES

• More and more investors are finding the ideal
  replacement property before lining up a buyer
• Must be structured several weeks in advance

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CURRENT TRENDS

• EXCHANGING PROPERTY WITH NO GAIN
• Investors are exchanging properties with little
  or no gain, maybe even selling at a loss, to
  avoid costly depreciation recapture

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LIKE-KIND EXAMPLES

• Examples of like-kind real estate
• , rental house
• Office building, warehouse, shopping center
• Land
• Tenant-in-Common (TIC) interest
• Conservation easements, utility easements
• Leasehold interest of 30 years (including
  options)

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LIKE-KIND DEFINED

• One of the major requirements of Section 1031 is
  that the replacement property must be like-kind
  to the relinquished property. In other words,
  both relinquished and replacement properties must
  be similar in nature, though they may not serve
  the same purpose. For example, using a 1031
  exchange, you can exchange any investment
  property (rental, industrial, multi-family, etc.)
  for another and defer up to 100 capital gains
  tax.

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10 31 exchange deadlines

• QI acts as middleman to facilitate an exchange
• Exchanger cannot have access to exchange proceeds
• Time Periods
• Replacement Property must be identified within
  45-Day Identification Period
• Replacement Property must be acquired within
  180-Day Exchange Period
• Title must be held in the same name as
  relinquished property

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1031 ADDITIONAL REQUIREMENTS

• Exchange must be set up (and 1031 docs signed)
  before title passed to buyer
• To maximize deferral, replacement property must
  have equal or greater VALUE and EQUITY.

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Selecting your QI

• Your QI is your partner throughout the exchange
• A QI handles the mandatory mechanics of a 1031
  exchange for an investor. 
• Have following responsibility
• Acquire relinquished properties from the
  taxpayer.
• Transfer the relinquished property.
• Acquire the replacement property.
• Transfer the replacement property to the taxpayer

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SUMMARY

• 1031 exchanges are a great wealth accumulation
  vehicle.
• Great way to accomplish long-term objectives
• Excellent estate planning tool
• Creates many opportunities to grow your business
• The more you know, the more you will benefit.
• 1031 sponsors.com. can help!