2. WHAT IS IT?
• A TAX DEFERRED EXCHANGE
AUTHORIZED AND DEFINED BY
SECTION 1031 OF THE INTERNAL
REVENUE CODE OF 1986, AS
AMENDED.
• 1031 EXCHANGE DEFERS TAXES
DOES NOT ELIMINATE TAXES
01/04/13 2
3. LANGUAGE OF IRC
SECTION 1031
• NO GAIN OR LOSS SHALL BE
RECOGNIZED ON THE
EXCHANGE
• OF PROPERTY HELD FOR
PRODUCTIVE USE IN A TRADE
OR BUSINESS OR FOR
INVESTMENT
01/04/13 3
4. LANGUAGE OF IRC
SECTION 1031
• IF SUCH PROPERTY IS
EXCHANGED SOLELY FOR
PROPERTY OF LIKE KIND
• WHICH IS TO BE HELD EITHER
FOR PRODUCTIVE USE IN A
TRADE OR BUSINESS FOR
INVESTMENT. 4
01/04/13
7. WHAT IS SAFE HARBOR?
• PROCESS TO AVOID
ACTUAL OR
CONSTRUCTIVE
RECEIPT OF MONEY
• MOST COMMON SAFE
HARBOR IS THE
QUALIFIED
01/04/13 INTERMEDIARY 7
8. KEYS TO A SUCCESSFUL
EXCHANGE
• EXCHANGER SELLS
RELINQUISHED PROPERTY
WHICH WAS USED FOR
BUSINESS OR INVESTMENT
PURPOSE
• CONSIDER CONVERSION
01/04/13 8
9. KEYS TO A SUCCESSFUL
EXCHANGE
• EXCHANGER MUST ACQUIRE
LIKE KIND REPLACEMENT
PROPERTY.
01/04/13 9
10. KEYS CONT’D
• EXCHANGER CAN NOT
RECEIVE OR CONTROL THE
PROCEEDS OR OTHER
BENEFITS.
• ALL NET EQUITY TRANS-
FERRED TO RELINQUISHED
PROPERTY
01/04/13 10
11. KEYS, CONT’D
• RELACEMENT PROPERTY
MUST BE OF SAME OR
GREATER VALUE AS
RELINQUISHED PROPERTY.
01/04/13 11
12. KEYS, CONT’D
• ADD EXCHANGE
COOPERATION CLAUSE TO
P&S;
• EXCHANGE AGREEMENT WITH
QUALIFIED INTERMEDIARY
PRIOR TO CLOSING ON
RELINQUISHED PROPERTY.
01/04/13 12
13. WHAT IS LIKE KIND
PROPERTY
• LIVESTOCK • REALTY
• MOTOR • FURNITURE
VEHICLES
• AIRCRAFT
• BOATS
01/04/13 13
14. EXAMPLES: EXCHANGE OF
LIKE KIND REALTY
• VACANT LAND • 2 FAMILY FOR
FOR RETAIL
IMPROVED PROPERTY
LAND
• CONDO FOR
• 1 FAMILY FOR INDUSTRIAL
OFFICE PROPERTY
BUILDING
01/04/13 14
15. WHAT PROPERTY IS
EXCLUDED FROM A LIKE
KIND EXCHANGE
• STOCK IN • NOTES
TRADE
• BONDS &
• INVENTORY SECURITIES
• SHARES OF • INTERESTS IN
STOCK PARTNERSHIP
01/04/13 15
16. CONTROL VIOLATES IRC
SECTION 1031
• TO AVOID ISSUES OF
CONTROL CERTAIN PERSONS
ARE EXCLUDED FROM ACTING
FOR AN EXCHANGER
– “RELATED PARTIES”
01/04/13 16
17. CONTROL VIOLATES IRC
SECTION 1031 CONT’D
– EMPLOYEE; ATTORNEY;
REAL ESTATE BROKER OR
AGENT; ACCOUNTANT;
INVESTMENT BANK OR
BROKER - 2 YEARS PRIOR TO
TRANSFER.
01/04/13 17
23. TIME LIMITS FOR DELAYED
EXCHANGE UNDER IRC
SECTION 1031
• TIME LIMITS ARE SPECIFC AND
INFLEXIBLE;
01/04/13 23
24. TIME LIMITS FOR DELAYED
EXCHANGE UNDER IRC
SECTION 1031
• FROM CLOSING OF
RELINQUISHED PROPERTY
EXCHANGER HAS 45 DAYS TO
IDENTIFY REPLACEMENT
PROPERTY;
01/04/13 24
25. TIMELINE FOR DELAYED
EXCHANGE CONT’D
• IDENTIFICATION OF
REPLACEMENT PROPERTY
MUST BE IN WRITNG, AKA
PROPERTY ID LIST.
01/04/13 25
26. TIMELINE FOR DELAYED
EXCHANGE CONT’D
• AFTER 45 DAYS THE
EXCHANGER MAY NOT
CHANGE THE PROPERTY
IDENTIFICATION LIST;
• IF EXCHANGER CHANGES LIST
TAX DUE!
01/04/13 26
27. IRC 1031 TIMELINE FOR
DELAYED EXCHANGE CONT’D
• THE PURCHASE OF
REPLACEMENT PROPERTY
MUST BE COMPLETED WITHIN
180 DAYS AFTER THE CLOSE
OF THE RELINQUISHED
PROPERTY.
01/04/13 27
28. EXAMPLE OF TIMELINE FOR
DELAYED EXCHANGE
• CLOSING ON RELINQUISHED
PROPERTY - MAY 9, 2006
• EXCHANGER HAS 45 DAYS OR
UNTIL JUNE 22, 2006 TO
IDENTIFY A REPLACMENT
PROPERTY IN WRITING.
01/04/13 28
29. EXAMPLE OF TIMELINE FOR
DELAYED EXCHANGE
• CLOSING ON REPLACEMENT
PROPERTY MUST OCCUR NO
LATER THAN- NOVEMBER 8,
2006 (180 DAYS FROM MAY 9,
2006 ).
01/04/13 29
30. EXCHANGE & TITLE
• RELINQUISHED & RELACEMENT
PROPERTY MUST HAVE SAME
TITLE
• A CHANGE IN TITLE DEFEATS
TAX DEFERAL
01/04/13 30
31. EXAMPLES OF TITLE
• ABC TRUST RELINQUISHES
ABC TRUST MUST ACQUIRE
• JOHN JONES, AN INDIVIDUAL
RELINQUISHES JOHN JONES,
AN INDIVIDUAL, MUST
ACQUIRE.
01/04/13 31
32. EXCHANGE & TITLE
• A LENDER MAY REQUIRE A TITLE
CHANGE BY ADDING A SPOUSE
OR MOVINGTITLE TO AN
INDIVIDUAL NAME FROM AN
ENTITY NAME.
01/04/13 32
33. ADDITIONAL
TECHNICALITIES
• LLP, LLC • MIXED USE
– CAN NOT TAKE – EXCHANGE
ADVANTAGE ONLY VALID
OF EXCHANGE FOR BUSINESS
UNLESS LLC USE PORTION
OR LLP OWNS
100% OF THE
INVESTMENT
01/04/13 33
34. ADDITIONAL
TECHNICALITIES
• VACATION & • IDENTIFICATION
SECOND HOMES
– IF PROPERTY – EXCHANGER
DOES NOT PERMITTED TO
PRODUCE IDENTIFY 3
CURRENT PROPERTIES
INCOME DOES OF UNLIMITED
NOT QUALIFY VALUE
01/04/13 34
35. ADDITIONAL
TECHNICALITIES
• IDENTIFICATION OF MORE
THAN 3 PROPERTIES
– TOTAL FAIR MARKET VALUE OF
PROPERTY BEING IDENTIFIED
CANNOT EXCEED 200% OF FAIR
MARKET VALUE OF THE
RELINQUISHED PROPERTY
01/04/13 35
39. CONCLUSION
TAX SAVINGS DETERMINED BY
KNOWING/FOLLOWING THE
RULES.
• PROFESSIONAL TEAM CONCEPT -
IMPORTANT TO CONSULT WITH YOU
LEGAL AND FINANCIAL
PROFESSIONALS;
• ENLIST AN EXPERIENCED
INTERMEDIARY TO SUCCESSFULLY
COMPLETE THE TRANSACTION.
01/04/13 39
40. REVIEW
• ARRANGE FOR SALE OF
PROPERTY AND INCLUDE
EXCHANGE LANGUAGE IN P&S
• SIGN AGREEMENT WITH
QUALIFIED INTERMEDIARY
• SIGN OVER DEED TO Q.I.
01/04/13 40
41. REVIEW
• AT CLOSING NET SALE
PROCEEDS PAID TO QI
• WITHIN 45 DAYS IDENTIFY
PROPERTY OF LIKE KIND TO
BE ACQUIRED
01/04/13 41
42. REVIEW
• WITHIN 180 DAYS OF SALE
PURCHASE ONE OF THE
PROPERTIES ON THE
IDENTIFICATION LIST AND
COMPLETE THE EXCHANGE.
01/04/13 42
Frequently, presenters must deliver material of a technical nature to an audience unfamiliar with the topic or vocabulary. The material may be complex or heavy with detail. To present technical material effectively, use the following guidelines from Dale Carnegie Training®. Consider the amount of time available and prepare to organize your material. Narrow your topic. Divide your presentation into clear segments. Follow a logical progression. Maintain your focus throughout. Close the presentation with a summary, repetition of the key steps, or a logical conclusion. Keep your audience in mind at all times. For example, be sure data is clear and information is relevant. Keep the level of detail and vocabulary appropriate for the audience. Use visuals to support key points or steps. Keep alert to the needs of your listeners, and you will have a more receptive audience.
Determine the best close for your audience and your presentation. Close with a summary; offer options; recommend a strategy; suggest a plan; set a goal. Keep your focus throughout your presentation, and you will more likely achieve your purpose.
If you have several points, steps, or key ideas use multiple slides. Determine if your audience is to understand a new idea, learn a process, or receive greater depth to a familiar concept. Back up each point with adequate explanation. As appropriate, supplement your presentation with technical support data in hard copy or on disc, e-mail, or the Internet. Develop each point adequately to communicate with your audience.
In your opening, establish the relevancy of the topic to the audience. Give a brief preview of the presentation and establish value for the listeners. Take into account your audience’s interest and expertise in the topic when choosing your vocabulary, examples, and illustrations. Focus on the importance of the topic to your audience, and you will have more attentive listeners.
In your opening, establish the relevancy of the topic to the audience. Give a brief preview of the presentation and establish value for the listeners. Take into account your audience’s interest and expertise in the topic when choosing your vocabulary, examples, and illustrations. Focus on the importance of the topic to your audience, and you will have more attentive listeners.
Determine the best close for your audience and your presentation. Close with a summary; offer options; recommend a strategy; suggest a plan; set a goal. Keep your focus throughout your presentation, and you will more likely achieve your purpose.