Reverse Exchanges

Recent IRS Procedure Ruling on Reverse Exchanges Established The Following:

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Reverse Exchanges

Recent IRS Procedure Ruling on Reverse Exchanges Established The Following:

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The basics of tax-deferred exchanges.

45 day identification period 180 day total exchange period The Exchange Accommodator title holder is not the taxpayer or a disqualified person and is subject to federal income tax The Accommodator must hold all indicia of ownership at all times from the date of its acquisition of either the relinquished or replacement property until the property is transferred to either the taxpayer as replacement property, or as relinquished property to a person who is not the taxpayer or a disqualified person. No later than 5 business days after the transfer of ownership of the property to an accommodator, the taxpayer and the accommodator must enter into a written qualified exchange accommodation agreement. The taxpayer or a disqualified person may guarantee the obligations of the accommodator (including debt incurred to acquire the property) and may indemnify the accommodator against costs and expenses. The accommodator may lease the property to the taxpayer or a disqualified person. The taxpayer or a disqualified person may loan or advance funds to the accommodator. The taxpayer or a disqualified person may manage the property, supervise improvements, act as a contractor or provide other services to accommodator with respect to the property

Doing an IRC Section 1031 tax-deferred exchange is often but not always the best strategy for investors. Below are reasons to do an exchange and reasons not to do an exchange. You would want to do an exchange if... you want to dispose of one or more properties (the "relinquished property"), acquire one or more like kind property (the "replacement properties"), and you have a gain on the relinquished property which you do not want to pay taxes on; the additional costs to do an exchange do not exceed the tax on the gain if a sale was done instead of an exchange. You would not want to do an exchange if... You do not have a gain on the relinquished property; You have no desire to acquire more like kind property; You have property with a capital loss and want to "recognize" the loss (i.e., if you want to use the loss to offset other gains you do not want to do an exchange); You want the benefit of a higher basis and greater depreciation in the replacement property that a straight purchase allows. (Since the Tax Reform Act of 1986 selling a property instead of exchanging it, recognizing the gain, then reinvesting to get a higher depreciable basis is generally not the preferred strategy. However, check with your tax advisor so they can run the calculations and comparisons for you.) Now that you know the reaso

45 day identification period 180 day total exchange period The Exchange Accommodator title holder is not the taxpayer or a disqualified person and is subject to federal income tax The Accommodator must hold all indicia of ownership at all times from the date of its acquisition of either the relinquished or replacement property until the property is transferred to either the taxpayer as replacement property, or as relinquished property to a person who is not the taxpayer or a disqualified person. No later than 5 business days after the transfer of ownership of the property to an accommodator, the taxpayer and the accommodator must enter into a written qualified exchange accommodation agreement. The taxpayer or a disqualified person may guarantee the obligations of the accommodator (including debt incurred to acquire the property) and may indemnify the accommodator against costs and expenses. The accommodator may lease the property to the taxpayer or a disqualified person. The taxpayer or a disqualified person may loan or advance funds to the accommodator. The taxpayer or a disqualified person may manage the property, supervise improvements, act as a contractor or provide other services to accommodator with respect to the property

Doing an IRC Section 1031 tax-deferred exchange is often but not always the best strategy for investors. Below are reasons to do an exchange and reasons not to do an exchange. You would want to do an exchange if... you want to dispose of one or more properties (the "relinquished property"), acquire one or more like kind property (the "replacement properties"), and you have a gain on the relinquished property which you do not want to pay taxes on; the additional costs to do an exchange do not exceed the tax on the gain if a sale was done instead of an exchange. You would not want to do an exchange if... You do not have a gain on the relinquished property; You have no desire to acquire more like kind property; You have property with a capital loss and want to "recognize" the loss (i.e., if you want to use the loss to offset other gains you do not want to do an exchange); You want the benefit of a higher basis and greater depreciation in the replacement property that a straight purchase allows. (Since the Tax Reform Act of 1986 selling a property instead of exchanging it, recognizing the gain, then reinvesting to get a higher depreciable basis is generally not the preferred strategy. However, check with your tax advisor so they can run the calculations and comparisons for you.) Now that you know the reaso