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 Notes from Leonard, Your 1031 Guy
 It's been a busy month for Asset Exchange Company. Luckily, we've seen a slight increase in exchange activity (although we'd love to see more) and many of our investors are 'gearing' up for transactions. We have several clients in the process of conducting Reverse Exchanges and one investor involved in an easement exchange. In addition, we conducted 12 workshops in the past month in the Bay Area and the Greater Los Angeles area. If you would like to schedule a workshop for your office, please contact us at 877-471-1031 or via email. It's surf season so maybe I'll see you at the beach this weekend!
Year End Exchange Issues: A Must Read!
Issue #1: Hidden Value in Failed Exchanges
Did you know that even if your 1031 Exchange fails you may be able to defer your tax liability for an additional 12 months? Due to a wrinkle in the tax code, investors who open a 1031 Exchange account in 2009 but fail or cancel the 1031 Exchange and receive the sale proceeds in 2010 will be obligated to pay taxes on the transaction by April 15th of 2011. That's an additional 12 months of tax deferral! What could you do with your tax dollars for an additional 12 months?
Keep in mind the taxpayer must have a bona fide intent to exchange. Please contact Asset Exchange Company at 877-471-1031 if you would like to discuss this issue further.
Issue #2: Less than 180 Days to Exchange!
Most people automatically assume that they have 180 days to complete their 1031 Exchange. In some instances this is not the case. For clients who close escrow on their relinquished property after October 17th, the exchange must be completed on or before tax returns are filed.
The tax code states that the timeframe to complete a 1031 Exchange is 180 days or until taxes are due, whichever is sooner.
For a calendar year taxpayer, taxes are due on April 15th. If escrow closes on the relinquished property after October 17th, the exchange period is less than 180 days. However, the taxpayer can get the full 180 days, by obtaining an automatic extension of the due date for filing the tax return.
Sharing Knowledge and Minimizing Taxes
Investors and real estate professionals call our office every day seeking assistance with interesting or complicated 1031 Exchange scenarios. Below are a few scenarios that we thought might be helpful to share:
Buy and sell in Nevada, avoid taxes?
A young man living in California called our office under the impression that if he owned all his rental properties in Nevada (which has no state tax), he could avoid paying California state capital gains taxes upon the sale of the properties. This is incorrect. All California residents are obligated to pay California taxes regardless of where the money is made!
Become a Nevada resident, avoid taxes!
The good news is that if you live in a state with no state taxes, the sale of your property is tax free. The bad news is that if you live in a state with no state taxes but make money in a state with taxes – you’ll owe the state the tax. Money made in California for example, is taxed by California…regardless of where the person lives. The current California capital gains tax rate is 9.3%.
Mobile Home Exchange?
Simply put, if it doesn’t have a foundation, it’s not real estate. Mobile homes without foundations are considered personal property and can not be exchanged for real estate under Section 1031.
My Home is Worth Too Much!
A homeowner called our office with a nice problem. The residence she purchased for $100K is now worth over $1MM. The problem is that the gain ($900K) is more than the homeowners exemption allows tax free ($500K for a married couple). The solution: rent the home out before selling it and combine both the 1031 Exchange and the homeowners exemption to avoid and defer the entire tax liability.
If you have any questions about how to structure your transaction to minimize your tax liability please call 877-471-1031.
The
subject matter in this newsletter is intended as general information
only and not intended as tax or legal advice. Please always consult
your tax or legal advisor for any specific tax or legal matters.
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Asset Exchange Company offers :
*Competitive Rates and Fees ($499 to open an account)
*Free Audit Support
*Attorney/CPA
*Experience
*Integrity
*Custom Banking Solutions
*Individualized Solutions
Tel: 877-471-1031
GET YOUR LISTINGS NOTICED!
Brokers send us hundreds of great listings each month in the hopes of getting them in front of our 1031 Exchange clients.
In
an effort to streamline the process, Asset Exchange Company will be
sending out a regular email to our clients with some of these
listings. If you would like to submit your listing for consideration
please click here.
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