S1031 re   5.6.13 vt realtors 2013
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S1031 re 5.6.13 vt realtors 2013

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Class presentation materials for Vermont Realtors 5-8-2013

Class presentation materials for Vermont Realtors 5-8-2013

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  • Opening screen: The Power of Section 1031Welcome to “The Power of Section 1031”. We appreciate the time you took out of your schedules to come and spend some time with us. Our purpose here today is to turn you on to some very powerful aspects of Section 1031, show you how to identify the strategic uses for your clients, and demonstrate some alternative strategies that you may or may not have been aware of.What an exciting topic, figuring out ways in which you can help your clients to take advantage of interest free loans from Uncle Sam.
  • To many professionals get caught up in the belief that Section 1031 is only about deferring captial gains. Its actually all about leverage. Using what they would have paid immediately in Capital Gains Taxes to improve the quality and value of their holdings is REALLY what Section 1031 is all about.Look as it as a Gift from Uncle Sam.
  • Ok, lets do the math. These numbers suggest that investors paid the government over $60B in capital gains taxes when in fact, they could have used this money in their own portfolios, interest free, for as long as they would like. Wait a minute…Why is this so? Don’t let your clients fall into this trap.
  • We are here today to provide you a great service. We are so passionate about our client’s holding on to their money and using it to secure their future, we want everyone who is in a position to help to understand the very basic concepts surrounding a Section 1031 Exchange.We hope by the end of this session you will most everything you need to immediately recognize the dramatic effect Section 1031 can have on its users financial future.
  • Section 1031 is not just about exchanging property for property. It has also become an extremely valuable tool for building wealth, sheltering investments, business exit planning and estate planning. What once was considered an obscure little known part of the US Tax Code has now become one of the most powerful tools that Attorneys, CPAs, Financial Planners and Estate Planners have in their arsenal that makes a dramatic difference in their client’s financial future.Section 1031 does not work without the services of a Qualified Intermediary. Because this is the case, over the past 10 years we have seen an explosion in the QI industry. Fees and services are all over the board, and the level of service that is being provided fluctuates from the “paper-mill” to full service, full support practices. Edmund & Wheeler is, and has been for nearly 28 years, a key Section 1031 resource to New England professionals. We are a full service practice.
  • Section 1031 fundamentally is about the relocation and reallocation of your client’s real estate assets, all without paying capital gains taxes. Relocation could be across the street, or across the nation. Clients can relocate their holdings to several markets, creating geographical diversity. They can also reallocate holdings by combining multiple holdings into one more valuable property. They can sell apartment buildings and Exchange for single family housing units, or they can opt for one of the passive real estate investments available to them and leave the day-to-day management of real estate to a professional property management team.
  • Section 1031 fundamentally is about the relocation and reallocation of your client’s real estate assets, all without paying capital gains taxes. Relocation could be across the street, or across the nation. Clients can relocate their holdings to several markets, creating geographical diversity. They can also reallocate holdings by combining multiple holdings into one more valuable property. They can sell apartment buildings and Exchange for single family housing units, or they can opt for one of the passive real estate investments available to them and leave the day-to-day management of real estate to a professional property management team.
  • Bust the “Like Kind” Myth. Run through the slides with examples of exchange options. Note the dual arrow to note multiple property exchanges and the fact that ANY real property can be exchange for ANY real property.
  • The IRS spells out very succinctly what entities can qualify for an exchange.
  • All 1031 exchanges must involve swapping or trading with other property owners...... (NO)Well before delayed exchanges were codified (by IRS) in 1984, all simultaneous exchange transactions of Real Estate required the actual swapping of deeds plus the simultaneous closing among all parties to a 1031 exchange. In most cases these type of exchanges were comprised of many of exchanging parties, as well as numerous exchange real estate properties. Now today, there's no such requirement to swap your own property with someone else's property, in order to complete an IRS approved exchange. The rules have been refined and ratified to the point that the current process is much more indicative of your qualifying intent, rather than the logistics of the Real Estate property closings.
  • Its required that all types of 1031 exchanges must close simultaneously....... (NO)There was a time when all types of exchanges had to be closed on a simultaneous (same day) basis, now they (1031) are rarely completed in this type of format any longer. As a matter of fact, a majority of the exchanges executed are closed now as delayed exchanges.
  • "Like-kind" means purchasing the same type of property which was sold....... (NO)Don’t make this mistake. There is a common misconception that “Like-Kind” is literal. There are currently 2 types of properties that qualify as a 'like-kind': Property held for investment and/or Property held for a productive use, as in a trade or business. We will talk more about like kind in a few minutes.
  • 1031 Exchanges must be limited to 1 exchange and 1 replacement property....... (NO)This statement is a perfect example of another 1031 exchanging myth. Let me repeat, there are no provisions within either the IRS Code or the US Treasury Regulations that can restrict the amount and number of real estate properties that can be involved in an exchange. Thus, in exchanging out of several properties into one replacement property or the vice versa of selling of one property and acquiring several other properties, are perfectly acceptable strategies and uses of a 1031. The record for our practice happens to be 16: one client exchanged one property for 16; another exchanged 16 for one.
  • You Can NOT take cash out of a Section 1031 Exchange....... (NO)You can take cash out of a Section 1031 Exchange, however, the cash that you take out will be immediately taxable.
  • Let’s put aside for a moment what Section 1031 IS, and let’s examine what it can DO.In this hypothetical situation we have two investors that over the next fifteen (15) years will be buying and selling real estate as part of their investment portfolio. Property Owner #1 will buy and sell his property outright, and Property Owner #2 will use Section 1031 as an on-going strategy to leverage what he would have paid in taxes, to much better properties.For the next few slides we gratefully thank Grubb & Ellis Commercial Real Estate Services.Let’s take a look.
  • Let’s put aside for a moment what Section 1031 IS, and let’s examine what it can DO.In this hypothetical situation we have two investors that over the next fifteen (15) years will be buying and selling real estate as part of their investment portfolio. Property Owner #1 will buy and sell his property outright, and Property Owner #2 will use Section 1031 as an on-going strategy to leverage what he would have paid in taxes, to much better properties.For the next few slides we gratefully thank Grubb & Ellis Commercial Real Estate Services.Let’s take a look.
  • Let’s put aside for a moment what Section 1031 IS, and let’s examine what it can DO.In this hypothetical situation we have two investors that over the next fifteen (15) years will be buying and selling real estate as part of their investment portfolio. Property Owner #1 will buy and sell his property outright, and Property Owner #2 will use Section 1031 as an on-going strategy to leverage what he would have paid in taxes, to much better properties.For the next few slides we gratefully thank Grubb & Ellis Commercial Real Estate Services.Let’s take a look.
  • You can see immediately on the first transaction the Property Owner #2 has $65,000 more equity to invest, thus increasing his monthly cash flow considerably.
  • Here are the assumptions for the hypothetical. The numbers here are fairly common throughout the country. Remember that the 15% capital gains taxes quickly add up to over 25% or more when you factor in state taxes and depreciation recapture.
  • At the end of the first 5-year period, both investments have grown by 6%/yr/yr, without compounding.Owner #2 is almost $100,000 ahead of Owner #1 in equity, and 33% ahead in his monthly cash flow. Both reinvest in a (TIC) for another 5 years, but, again, Owner #2 is investing pre-tax and Owner #1 is investing after-tax.
  • At the end of 10 years, Owner #2 is way ahead of Owner #1 in terms of the value of the equity he has to earn money upon.If they both sold at this point, all Owner #1 would owe is $17,484, the capital gain on the buildup in value during the second 5-year period.If Owner #2 sold at this point, he would owe taxes on all of his gains, from the beginning to the present, approximately $101,400., leaving him $44,264 better off than Owner #1.Instead they both decide to re-invest. Owner #2’s cash flow is 40% greater than Owner #1’s, because of the greater equity.And look at the next two slides……
  • At the end of 10 years, Owner #2 is way ahead of Owner #1 in terms of the value of the equity he has to earn money upon.If they both sold at this point, all Owner #1 would owe is $17,484, the capital gain on the buildup in value during the second 5-year period.If Owner #2 sold at this point, he would owe taxes on all of his gains, from the beginning to the present, approximately $101,400., leaving him $44,264 better off than Owner #1.Instead they both decide to re-invest. Owner #2’s cash flow is 40% greater than Owner #1’s, because of the greater equity.And look at the next two slides……
  • The base upon which equity has built up is greater after 10 years and….
  • His cash flow is much greater.
  • 1. The Exchange Agreement with Edmund & Wheeler, Inc. which governs the overall transaction.  This document MUST be in force before the closing.2. The Purchase and Sale Agreement to sell the Relinquished Property.  This step may take place before Step 1 (the only out-of-sequence exception).The closing of the Relinquished Property; if several are involved, the first in chronological order.  In this step, the deed to the property is given to the Buyer.3. The closing of the Relinquished Property; if several are involved, the first in chronological order.  In this step, the deed to the property is given to the Buyer.4. Rather than going to the Exchangor, the Buyer's funds are used to pay all of Exchangor's expenses (including mortgages, if any), with the NET going directly to a money center bank into a separate, interest-bearing account established in the Exchangor's name and Social Security number.5. This is an interactive step encompassing all communications post-closing with the Exchangor and Edmund & Wheeler, Inc.  Included are the 45-day Identification Letter, instructions on how much of the account to be expended on particular properties, and final approval to close on the final choice(s).6. These are the precise instructions to Exchangor's attorney, bank or Title Company for the closing of the Replacement Property, and the wire transfer of approved funding.7. This is the Exchangor's receipt of the direct deed from the owner of the Replacement Property (C); the Exchangor achieves a Section 1031 Exchange between Steps 3 and 7, where in Step 3 a deed is given and in Step 7 a deed is received, and in between the Exchangor had no control (or Constructive Receipt) of funds.
  • One of Chris’ favorite Exchanges was a simple forward exchange for a campground owner. This Exchangor sold one large lakefront property and proceeded to use the next 45 days driving up and down the East Coast selecting Replacement Properties. He was in the enviable position of being able to identify more than three Replacement Properties (the simple rule). He used the 200% rule (to identify as many properties as he wanted as long as the total value of the properties identified did not exceed twice the value of the Relinquished Property). In the end, he acquired eleven new properties from Maine to Florida, many of them single family (rental) residences, including two new campgrounds. This Exchange allowed him to diversify his portfolio, generate significant cash flow from his new properties, and pay no capital gains tax. As they say in the business "one happy camper!" If he determines that one or more of his selections doesn’t satisfy his investment objectives, then after a year or two, he can exchange again.
  • Without having Uncle Sam shake the capital gains out of his pocket.
  • We are currently working with a client to acquire a significant piece of commercial real estate in New England. The client is in the process of selling six separate pieces of property in order to aggregate sufficient funds to make the new Replacement Property purchase. The client has been extremely careful (with our guidance) to time his sales and the new purchase all within a 45 day time frame. This is key to the success of the Exchange due to the fact that he will acquire not just one piece of property, but rather over a dozen condominiums. You will recall that you have two basic rules when it comes to identifying your Replacement property choices, the Three-Property Rule and the 200% Rule.This Exchange is an example of yet a third method of identifying Replacement property. It allows the client to acquire an unlimited number of properties, without regard to value or number as long as he acquires 95% (FMV) of what he identified. This can be a little nerve-racking for the investor and it pays to have a back-up plan. In the event something goes wrong with the acquisition, the client will have to hurry to identify other possible choices for each of the Exchanges in process.
  • 1. The Exchange Agreement with Edmund & Wheeler, Inc. which governs the overall transaction.  This document MUST be in force before the closing.2. Since the Replacement Property will be purchased (and Parked) before the sale of the Relinquished Property, a source of funds for the purchase must be arranged.  This can be the Exchangor, or their bank.  If a bank, the Exchangor will be expected to provide a guarantee.3. This is the loan to the Single Purpose Entity which the IRS has renamed an Exchange Accommodation Titleholder (EAT)that will buy the Replacement Property from its owner (C) and hold it until the Relinquished Property (A) can be sold to the Buyer (B).4. This is the actual purchase of the Replacement Property from its owner (C).5. At this step, the Entity (and not the Exchangor) becomes thelegal owner of the Relinquished Property.  The 180-day Exchange Period commences.6. The Relinquished Property goes under Agreement of Sale to Buyer (B).7. The Exchangor gives Buyer (B) a deed, and the transaction closes; this step must occur before the 180th day, with enough margin to complete Steps 8-11.8. Rather than going to the Exchangor, the Buyer's funds are used to pay all of Exchangor's expenses (including mortgages, if any), with the NET going directly to a money center bank into a separate Qualified Escrow Account established in the Exchangor's name and Social Security number.9. As Edmund & Wheeler, Inc. is the signer on the Qualified Escrow Account, it causes the balance to be paid to the EAT in exchange for its deed for the Replacement Property executed in favor of the Exchangor.10. Before the deed can be issued, however, the EAT must pay off (or pay down to the extent of available cash) the loan made to it at Step 3, above.11. This is the Exchangor's receipt of the direct deed from the EAT as owner of the Replacement Property; provided the deed is delivered to the Exchangor on or before the 180th day. The Exchangor achieves a Section 1031 Exchange between Steps 7 and 11, where at Step 7 a deed is given and at Step 11 a deed is received, and in between the Exchangor had no control (or Constructive Receipt) of funds.
  • George’s favorite Exchange was an "acquire first, reverse exchange". Sounds complicated, but it’s not. Our client had negotiated the purchase of a significant new property but had been unable to sell a piece of existing property in time to do the deal. Rather than jeopardize the purchase, we created a single purpose entity (SPE), in this case, a Massachusetts trust, to acquire the new (parked) property. Edmund & Wheeler, Inc. was engaged to create the new entity, hold the property until the old property was sold and the proceeds are available to acquire the "parked" property. The Exchangor funded the purchase with his own and other bank resources. Once the old property was sold, the new property was deeded to the Exchangor. Since it is not permissible to own the old and new property at the same time, this strategy accomplished the Exchangor’s desired outcomes, again without capital gains tax.
  • 1. The Exchange Agreement with Edmund & Wheeler, Inc. which governs the overall transaction.  This document MUST be in force before the closing.2. The Purchase and Sale Agreement to sell the Relinquished Property.  This step may take place before Step 1 (the only out-of-sequence exception).3. The closing of the Relinquished Property; if several are involved, the first in chronological order.  In this step, the deed to the property is given to the Buyer.  This step starts the 45-day Identification Period and the 180-day Exchange Period.4. Rather than going to the Exchangor, the Buyer's funds are used to pay all of Exchangor's expenses (including mortgages, if any), with the NET going directly to a money center bank into a separate, interest-bearing Qualified Escrow Account established in the Exchangor's name and Social Security number.5. The Exchangor has identified property C (property needing improvements) as the Replacement Property; at this Step, Edmund & Wheeler, Inc. causes the necessary purchase price for this property to be advanced to the Single Purpose Entity (which IRS has renamed an Exchange Accommodation Titleholder (EAT)) which has been formed to own and improve the identified Replacement Property.6. This is the closing for Property C; this Step is the funding; and7. This Step is the legal acquisition.  At (or hopefully well before) this time, Exchangor engages Contractors and Materialmen to effectuate the desired improvements.8. These vendors begin work, and soon enough, bills begin to arrive, addressed to the EAT, the legal owner of the property.9. All invoices are presented to the Exchangor for approval for payment from the Account.10. Upon such approval, further advances are made by the QI to the EAT to cover each payment.11. The vendors are timely paid, until funds are exhausted.12. This is the Exchangor'sreceipt of the direct deed from the EAT as owner of the Replacement Property; provided the deed is delivered to the Exchangor on or before the 180th day (as adjusted), the Exchangor achieves a Section 1031 Exchange between Steps 3 and 12, where at Step 3 a deed is given and at Step 12 a deed is received, and in between the Exchangor had no control (or Constructive Receipt) of funds.
  • This is a classic "build-to-suit" transaction. Our client sold a commercial property and directed the proceeds of the sale by virtue of an Exchange Agreement to us as Qualified Intermediary. We created a single purpose entity to conduct the business, in this case a NH corporation. We then purchased, in the name of the new corporation, a piece of raw land (which had been subdivided and permitted) using the exchange proceeds. The client delivered specific instructions for the type of building to be constructed on the site and directed who the contractor would be to perform the work. We made a series of progress payments based on the work in place and the "ok" to pay by the client.Once all of the sale proceeds of the Relinquished Property were exhausted, the new property was deeded to the client and the corporation was closed and tax return filed on its behalf. The entire process was concluded within 180 days.
  • 1. The Exchange Agreement with Edmund & Wheeler, Inc. which governs the overall transaction.  This document MUST be in force before the closing.2. Since the Replacement Property will be purchased (and Parked) before the sale of the Relinquished Property, a source of funds for the purchase must be arranged.  This can be the Exchangor, or their bank.  If a bank, the Exchangor will be expected to provide a guarantee.3. This is the loan (and Line of Credit) to the Single Purpose Entity (which the IRS has renamed an Exchange Accommodation Titleholder (EAT)) that will buy the Replacement Property from its owner (C) and improve it and hold it until the Relinquished Property (A) can be sold to the Buyer (B).4. This is the actual purchase of the Replacement Property from its owner (C) by the EAT. 5. At this step, the EAT (and not the Exchangor) becomes the legal owner of the Relinquished Property.  The 180-day Exchange Period commences.  At (or hopefully well before) this time, Exchangor engages Contractors and Materialmen to effectuate the desired improvements.6. These vendors begin work, and soon enough, bills begin to arrive, addressed to the EAT, the legal owner of the property.7. All invoices are presented to the Exchangor for approval for payment from the Line of Credit.8. The vendors are timely paid, until the predetermined match point has been obtained.9. The Relinquished Property (A) goes under Agreement .10. The Exchangor gives Buyer (B) a deed, and the transaction closes; this step must occur before the 180th day, with enough margin to complete Steps 11-14.11. Rather than going to the Exchangor, the Buyer's funds are used to pay all of Exchangor's expenses (including mortgages, if any), with the NET going directly to a money center bank into a separate Qualified Escrow Account established in the Exchangor's name and Social Security number.12. As Edmund & Wheeler, Inc. is the signer on the Qualified Escrow Account, it causes the balance to be paid to the EAT in exchange for its deed for the Replacement Property executed Rather than going to the Exchangor.13. Before the deed can be issued, however, the EAT must pay off (or pay down to the extent of available cash) the loan made to it at Step 3, above.14. This is the Exchangor's receipt of the direct deed from the EAT as owner of the Replacement Property; provided the deed is delivered to the Exchangor on or before the 180th day, the Exchangor achieves a Section 1031 Exchange between Steps 10 and 14, where at Step 10 a deed is given and at Step 14 a deed is received, and in between the Exchangor had no control (or Constructive Receipt) of funds.
  • Our client required an industry specific building to be constructed on property that he identified. We created a single purpose entity to acquire the targeted land and then began construction of the facility. The construction was completed at day 135 and the client moved the going concern in to the facility. Once the former building was vacant, it could be shown to prospective buyers and sold before day 180.
  •  1. The Exchange Agreement with Edmund & Wheeler, Inc. which governs the overall transaction.  This document MUST be in force before the closing. 2. In consultation with the QI, the Exchangor determines what the NET proceeds would have been had the Relinquished Property sold that day; this is the cash amount of a loan to be made by the Exchangor to the Special Purpose Entity (Exchange Accommodation Titleholder (EAT)) that will buy the Relinquished Property from the Exchangor (A) and hold it until this property can be sold to the Buyer (B). 3. In this Step, the Exchangor executes a deed to the Relinquished Property to the EAT.  Not shown is a mortgage back to the Exchangor to provide for security.  The 180-day Exchange period commences. 4. The exact amount of the loan funds in Step 2 are turned over to Edmund & Wheeler, Inc. as QI. 5. Since the Exchangor has identified Property C as the Replacement Property, the QI is instructed to fund its purchase. 6. This is the Exchangor's receipt of the direct deed from the owner of the Replacement Property (C); the deed is delivered to the Exchangor almost immediately after the Steps above; the Exchangor achieves a Section 1031 Exchange between Steps 3 and 6, where in Step 3 a deed is given and in Step 6 a deed is received, and in between the Exchangor had no control (or Constructive Receipt) of funds. 7. Exchangor's former property (the Relinquished Property) is now legally owned by the EAT, however, the Exchangor is expected to continue the marketing effort and to approve all offers.  When Buyer (B) is found, the EAT executes a deed to the Exchangor's Relinquished Property in favor of this person. 8. The Buyer (B) pays the purchase price to the EAT, which uses the funds to: 9 . Payoff the bank (if any); and10. To repay the initial loan from the Exchangor.
  • Our client had an opportunity to acquire abutting property to his primary residence. The new property was vacant land but included more than 500 feet of shore front land. The client arranged for a borrowing sufficient to acquire the new property and the property was acquired by a single purpose entity with bank funds. The exchange began with the acquisition of the shore front property and then the client went to work to sell existing property that was held as a rental property in Florida. Florida sold within 180 days and the funds were passed though the exchange to pay down the debt on the new shore front property.
  • Of the alternative Exchange strategies, the Tenants-In-Common vehicle has become increasingly popular in the past few years. TICS offer the clients the opportunity to passively invest in a Grade A Real Estate Offering, resulting in monthly payments without the hassles of owning and managing typical investment real estate.
  • A Real Estate Investment Trust (REIT) is similar to a mutual fund for real estate investorsand offers the benefits of a diversified portfolio that is professionally managed alongwith distributing almost all of the net income to investors. Although a REIT can do anexchange at the entity level, individual REIT shares are considered personal propertyand do not qualify for an IRC Section 1031 exchange. For tax deferral under §1031, aninvestor must exchange real property for other “like-kind” real property.
  • Like a 1031 Exchange, a 721 exchange is also an effective vehicle for deferring capital gains taxes. So what differentiates a 721 Exchange? Instead of selling an investment property and exchanging it for another as prescribed under Section 1031, an investor using Section 721 contributes his or her property to a partnership. In turn, he or she receives interests in the partnership called operating partnership units (OP units). 721 Exchanges are often used by real estate investment trusts (REITs), which typically own all or substantially all of their assets through a subsidiary partnership with the REIT acting as general partner. The resulting corporate structure is called an umbrella partnership real estate investment trust, or UPREIT.
  • Benefits Of An UPREIT TransactionThe primary incentive for undertaking a transaction with an UPREIT results from the fact that the transaction can be completed on a tax-deferred basis. The owner does not recognize immediate gain on the transaction because the owner does not acquire publicly-traded stock in the REIT, but rather receives units in the operating partnership. While there are instances where the selling owner, particularly if it is an exempt entity that will not recognize taxable gain on the transaction, will be willing to undertake the real estate transaction directly with the publicly traded REIT, more often than not the transaction is undertaken with the operating partnership. If the operating partnership units received from the operating partnership end up in the owner's estate, the ultimate recipients of the units will receive a stepped up basis equal to the value at death or the alternate valuation date and the inherent gain resulting from the UPREIT transaction will not be subject to capital gains or income tax. The tax deferral or avoidance, as the case may be, gives UPREITs a large advantage over cash purchasers. This is particularly true for individuals or entities which have a low tax basis and therefore the potential gain is substantial.The second incentive for a property owner to participate in a UPREIT transaction is that, given the number and variety of publicly-traded UPREITs, a transaction can usually be structured which enables the property owner to convert an interest in one or more specific properties into an interest in a larger and more balanced portfolio of properties held by the UPREIT. The portfolio is often diversified as to property type and geography and usually benefits from the economies of scale and management that a larger entity can offer.The third, and perhaps ultimately most important benefit that the UPREIT structure permits, is that it allows an interest in illiquid individual properties to become more easily saleable. In the standard UPREIT transaction, a property owner can convert his or her units in the operating partnership into publicly-traded stock of the REIT, which is usually listed on a national exchange. While the conversion to stock may trigger a recognition of taxable gain, the flexibility permits the owner to unlock value and access capital as needed. The ability to convert an interest in the operating partnership into an interest in the REIT is not in itself valuable, however, unless the REIT interest can be more easily sold. Accordingly, property owners, as a part of the transaction, will negotiate a registration rights agreement, wherein the owner will have the ability to have the stock it would receive upon conversion of its operating partnership units registered with the Securities and Exchange Commission ("SEC") for resale so as to enable the property owner to sell its stock in the public markets.
  • Section 1031 classifies an investment in an Oil and Gas Production working interest and Royalty Interest as "like-kind" for 1031 exchanges. A working interest is a leasehold interest which allows the lessee the right to search for and produce Oil and Gas on a parcel of land and receive a portion of the proceeds of the Oil & Gas produced. Each fractional owner of an offering has the same rights as a single owner and can subdivide or offer for sale their ownership interest at any time on the open market.
  • Liquidity:There is an active secondary market for established Oil and Gas Production to sell directly to investors or by auctions specializing in Oil and Gas Production based on projected production and the commodity prices.   Life of Production:Long term projected production with proved reserves supported by qualified third party reports. Annual Return:Average payout of 15% to 18% per annum over the term. This payment must be considered as return of investment as well as return on investment as the future value of the investment will be zero when the production is completed. Tax Treatment:Income is eligible for tax free depletion allowance of approximately 15% which is not charged back upon the future sale or 1031 exchange of the investors "fractional interest". Diversification:Long term management free investment with secure cash flow with a wholly-owned interest with the investor controlling the timing and exit strategy.  Valuation:There are no drilling risks in Oil and Gas Production. Investments are valued on the amount of potential production and the price of the commodity. Prices will increase and decrease and therefore payouts will vary. Over the long term growth should provide an ideal inflation hedge.   International:Unlike real estate Oil & Gas is a Global commodity that is not solely dependant on the US economy and interest rates. Leverage:Investments are ideal for balancing equity and leverage to 50% of value is available through typical Bank loans to qualified borrowers. Closing:Quick and economic closing.  Individual 1031 Investors should consult their tax advisor, CPA, QI, and legal and financial advisors as part of making any investment decision. 
  • The purchase of a "fractional interest" in a qualified working interest offers the 1031 exchange Buyer the stability of an immediate economical closing with a predictable cash flow stream with the ability to participate in the future production with payment based on commodity prices over the long term.Portfolio Diversification: A 1031 Buyer now has a simple and economical vehicle to add diversification to a portfolio by acquiring highly liquid individual fractional ownership in one or several qualified Oil and Gas Production working interests in different markets with predictable Oil and Gas Production flow in place and no management responsibilities.
  • When someone is selling a business, professional practice or real estate, many individuals in these and similar financial situations would like to liquidate their investment without having to recognize the entire profit as taxable income in the year of the sale. Instead of taking a lump sum, the seller can now design a stream of income to meet his or her individual needs. By making the sale and having part of the proceeds payable over time, the seller can use the payment proceeds as a source of income and may be able to recognize the taxable gain as the installment payments are received or deemed received.Enables a 1031 Rescue – in the event a seller is unable to identify suitable replacement property for their 1031 exchange, a structured sale can be executed as a back up plan prior to the close of escrow. However, this option is only available if the original sales contract contained wording allowing for the possibility of a structured sale, and if the structured sale's contracts are signed before the close of escrow. (As a precaution, every sales contract should include such wording. Contact us for proper wording to include this possibility in your sales contract.)
  • Using a Structured Sale for Real Estate TransactionsA “structured sale” is a tax deferral strategy for sellers of real estate. It is an improved version of traditional “installment sales.” It allows the seller to take advantage of tax benefits and income security that were not previously available.  In a structured sale the seller is allowed to spread their capital gains tax liability over a span of years, while receiving guaranteed payments.BenefitsDefer capital gains taxes to the year you receive payments Earn pre-tax guaranteed rate of return on principal Set up payment stream to your liking Payments guaranteed by ALLSTATE Structured Sales Examples:Home owner sells their residence for a large gain Homeowner sells house for $2,000,000. Original purchase price was $500,000.  After a $500,000 exclusion, they are left with a $1,000,000 gain.  Instead of incurring a large capital gains tax at the time of sale, the seller elects to set up a guaranteed stream of income.  The seller now can structure all or a portion of the $2,000,000 and only pay taxes as they receive payments.  This is perfect for supplementing retirement. Clients selling an income propertyClient wants to get out of the “landlord” business but requires the steady stream of income that the tenants provide.  By using a structured sale, the owner can set-up his structure to mirror his former income, all the while deferring his capital gains.Investor that is not interested in 1031 exchanges and just wants to get out of the marketFor those clients who do not want to utilize the 1031 option, a structured sale is the perfect alternative. Like a 1031 exchange, a structured sale will defer capital gains tax, but the investment is an annuity, not a “like-kind” property exchange. Farmer selling his land to developerMany farmers are hesitant to sell their land to a developer because of huge capital gains liability and uncertainty about how to invest the proceeds. Structuring a portion of the transaction can be the “little extra” that makes the deal happen. A guaranteed income stream, resulting in continuation of income and deferral of capital gains are all potential benefits to the farmer.Home owners looking to down-size their residence Many homeowners sell their property and downsize in order to take a profit, retire, or re-locate to a less expensive market. They can structure their profit to match their mortgage on their new home and defer capital gains.  If they are retiring, structure plans can be set up to pay a guaranteed income for the rest of their life.
  • Assuming the assets being sold qualify for reporting on the installment method, here's how the process would typically work:          -The seller enters into an installment sale           agreement under which the buyer promises to           make periodic payments for a stated number of            years. The seller is NOT agreeing to take a note from the buyer, rather delay his receipt of cash, and to defer capital gains.         -The buyer assigns his or her periodic payment           obligations to an assignment company.          -The assignment company funds the payment           obligation by purchasing an annuity from an            insurance company.          -The insurance company begins making the            payments to the seller as agreed to under the           terms of the sale and issues an agreement to pay           on the performance of the assignment company.
  • We want to bring home the fact that there is really nothing “easy” about an Exchange. Our services entail years of experience in recognizing opportunity, working through the complexities, adhering to the rules, and helping our clients to plan for their future.
  • …we are here to answer your questions, analyze the opportunities, help pull you through the hoops, and successfully perform your exchanges. Our fees are derived when an Exchange Agreement is executed, there is never a charge for our consulting.

S1031 re   5.6.13 vt realtors 2013 S1031 re 5.6.13 vt realtors 2013 Presentation Transcript

  • Sponsored By:
  • Shhhhh.Don‟t tell anyone.Your clients are eligible forinterest free loans from the USGovernment……for as long as they‟d like.…for as many times as they‟dlike.
  • Of the approximately$200Billion in commercial &investement real estate transactionslast year, it is estimated that 20-30%could have benefited from Section1031 treatment.Only 3% did.
  • What‟s In It For You?• Absolutely Part of Your Fiduciary Responsibility• Tax Ramifications on the Sale of Investment Property are Key• Clients Will Appreciate Your Resourcefulness• Potentially More Sides & Multiple Commissions!• Help Your Client Sell and then Buy Replacement Property(ies)• You Never Know Until You Ask “Whatcha‟ Want” & “Whatcha‟ Got”• Become Involved With Client‟s Overall Real EstateStrategy• Strengthen & Expand Your Referral Base
  • About Our Firm• Practice began in 1981; incorporated in 1987• Exchanges are our exclusive line of business• Background of accommodators– John: 6 yrs training 1031, 5 yrs full time accommodator– Christine: 30 yrs residential & commercial lending; 4 yrs as bankpresident, 10 years as accommodator• Member of Federation of Exchange Accommodators• Specialize in facilitating exchanges and replacementproperty options• Nationwide practice; 48 states and counting…
  • Today We Will Explore…• What Is Section 1031?• Section 1031 Misconceptions• How To Recognize When to Use Section 1031?• Who Qualifies For an Exchange?• What Qualifies For an Exchange?• Real-life Examples of Our Exchanges• Alternative Exchange Strategies
  • Primary Objectives of This Course• Provide a Basic Section 1031 Education• Provide Tools & Information Enabling You toBetter Serve Your Clients• Assist You In Recognizing the StrategicApplications of Section 1031 and ExploreAlternative Replacement Strategies
  • Primary Objectives of This Course• Help You to Understand HowSection 1031 Integrates IntoYour Client‟s Overall FinancialGoals & Objectives• Demonstrate our Ability toBecome Your Section 1031Resource in the Future
  • What Is An Exchange?• Method to sell investment real estate and replace it with newproperty that doesn‟t trigger any tax.• Its essential elements are:– Give a Deed– Get a Deed– Don‟t handle Cash
  • What Is An Exchange?• Method to convert non-income producing property or LOWincome producing property to passive investments:– Managed Real Estate– NNN Leased Properties– Fractional Opportunities– Oil & Gas– Easements– Annuities• Method to purchase a property for eventualpersonal use!
  • The Five Critical Elements1. Intent2. Form and Documentation3. Control of Funds4. Like-Kind Properties5. Time Limits
  • The Regulation - Section 1.1031(k)-1“A deferred exchange isdefined as an exchange inwhich, pursuant to anagreement, the taxpayertransfers property held forproductive use in a trade orbusiness or for investment(the „relinquished property‟)and subsequently receivesproperty to be held either forproductive use in a trade orbusiness or for investment(the „replacementproperty‟).”QI
  • An Exchange at a GlanceExchange DocumentsRelinquished Property• Agreement With QI• Assignment of Contract• Notification of Assignment• Settlement InstructionsReplacement Property• Assignment• Notification• Settlement InstructionsQI
  • Section 1031(a)(1)“No gain or loss shall be recognized on theexchange of property held for productive use in trade orbusiness or for investment if such property is exchangedsolely for property of like kind which is held either forproductive use in a trade or business or for investment.”Section 1031 Works ONLY withInvestment propertyYOU MUST PROVE INTENT!
  • What is Investment Purpose?• Investment is the passive holding of property for more thana temporary period with the expectation of appreciation• Real estate (even if unproductive) held by a non dealer forfuture use or increment in value is held for investment andnot primarily for sale (Reg. Section 1.1031(a)-1(b))• Thus property held for sale in theimmediate future is not held forinvestment
  • What are the benefits of an Exchange?• Full capital gains tax deferral• Relocation of investment• Change in investment type• Diversification of investment• Planning of investment• Solve problem of joint ownership• Increase cash flow
  • Three essential elements:• The properties must be exchanged (not sold)• Both the “Relinquished” property and the “Replacement”property must be held by the same taxpayer for investmentor productive use• The properties must be “Like-Kind” with one another– Real property for real property– Personal property for personal property
  • Replacement Property Rules• The Three Property Rule - The Exchangor may identify up tothree properties, without regard to their value; or• The 200% Rule - The Exchangor may identify more than threeproperties, provided their combined fair market value does notexceed 200% of the value of the Relinquished Property; or• The 95% Rule - The Exchangor may identify any number ofproperties, without regard to their value, provided theExchangor acquires 95% of those properties.
  • Like-kind requirement• The term “like-kind” refers to the nature or character of theproperty and not to its grade or quality• Real property cannot be exchanged for personal property• Qualifying personal property can be exchanged forproperty of a similar character
  • Examples of Like-kind• Improved real property for Unimproved real property• Lease for >30 year• Partial interest for a whole interest• One property for more than oneproperty and vice versa
  • Like - KindSingle Family DwellingLandApartmentsCondosCommercial Development
  • What is Like Kind?ANY REAL PROPERTY IS LIKE KIND WITH ANY OTHER REALPROPERTY….Apartment BuildingSingle Family Dwelling
  • What is Like Kind?ANY REAL PROPERTY IS LIKE KIND WITH ANY OTHER REALPROPERTY….Multi-family DwellingSingle Family Dwelling
  • What is Like Kind?ANY REAL PROPERTY IS LIKE KIND WITH ANY OTHER REALPROPERTY….Land DevelopmentSingle Family Dwelling
  • What is Like Kind?ANY REAL PROPERTY IS LIKE KIND WITH ANY OTHER REALPROPERTY….Commercial PropertySingle Family Dwelling
  • Personal Property• Same General Asset Class or Product Code• North American Industry Classification System• Sector 31-33-Manufacturing– Examples: Heavy Construction Equipment, Well Drilling Equipment,Logging Equipment, Commercial Vessels, Commercial LaundryEquipment– See www.census.gov/naics
  • Timing is everything!• The Exchange period begins on the transfer of theRelinquished Property• Exchangor must identify qualified Replacement Propertywithin 45 days of closing• Exchangor must acquire within 180 days• There are no extensions unless mandated as a federaldisaster
  • Can Anyone Handle An exchange?• No! It must be a “Qualified Intermediary”(QI) as defined byregulation:• Cannot Be the Exchangor or a Relative• Cannot be an Agent of the Taxpayer One who has acted as employee, attorney, accountant, investmentbanker, broker or real estate agent with the past 2 years The QI Handles All Aspects of the Exchange and Should beInvolved EARLY in the Process
  • What does the QI do?• Creates Exchange Agreement• Has Standing in the Sale of Relinquished Property and Purchaseof Replacement Property• Notice of Assignment• Closing Instructions to Settlement Agent• Banking and Safeguarding of Exchange Funds• Assurance of Critical Deadlines Including the 45 & 180 DayDeadlines• Final accounting for tax purposes
  • Who Qualifies for an Exchange?Owners of investment property and business property mayqualify for a Section 1031 deferral. Individuals, C Corporations,S corporations, partnerships (general or limited), limited liabilitycorporations, trusts and any other taxpaying entity may set upan exchange of business or investment properties for businessor investment properties under Section 1031.
  • Does Your Situation Qualify?
  • The Five Most Common Section 1031Misconceptions1All 1031 Exchanges must involveswapping or trading with otherproperty owners......
  • The Five Most Common Section 1031Misconceptions2It‟s required that all types of 1031exchanges must closesimultaneously......
  • The Five Most Common Section 1031Misconceptions3"Like-kind" means purchasing thesame type of property which wassold.......
  • The Five Most Common Section 1031Misconceptions41031 Exchanges must be limited to 1exchange and 1 replacementproperty.......
  • The Five Most Common Section 1031Misconceptions5A Section 1031 is NOT a path to cash.
  • Break Time…
  • The Power of Section 1031What happens when both participate in 3 typical realinvestment estate transactions……with radically different approaches?
  • The Power of Section 1031Joe is going to sell his propertyoutright, and pay his taxes!
  • The Power of Section 1031Joe‟s Boss is going to use Section 1031to build his wealth while leveragingUncle Sam‟s money.
  • First Transaction - Today
  • Hypothetical Example Assumptions
  • Second Transaction – In 5 Years
  • Third Transaction – In 10 Years
  • Fourth Transaction – In 15 Years$361,336 $507,000$108,400 $152,100($21,680) $ 0$448,056 $659,100$2,240 $3,296
  • Summary of Wealth Building Benefits4th Transaction $448,056 $659,100Cumulative Increase 49.3% 119.7%
  • Summary of Increased Cash FlowAt 15th Year
  • The After-Tax Analysis (a sale in Year 15)• Joe The Plumber (in Year 15)– Has Property worth $448,056; all taxes have been paid• His Boss (in Year 15)– Has property worth $659,100, with $136,810 tax due• Net Result (after tax):– His Boss has $74,234 more wealth than Joe, and hasreceived $92,779 more income.– But why would his Boss ever pay the tax when he canexchange over & over?
  • The Most Common Exchange Types• Delayed Exchange– The client sells his property, identifies replacement property optionswithin 45 days, then purchases the property(ies) within 180 days.• Reverse Exchange– The client purchases (with a Single Purpose Entity) the replacementproperty before his current property is sold. The client then has 180days to close on his relinquished property.• Build-to-Suit– The client wishes to purchase and improve a property(ies) with theproceeds from the sale of his relinquished property. This is alsoaccomplished with a Single Purpose Entity.
  • Case StudiesThe case studies outlinedare presented as arepresentation of the 5 mostcommon types of Section1031 exchanges.Please note that the casestudies have been simplifiedand several essential stepshave been omitted for clarity.Click on the case study youwould like to review.www.section1031.com
  • Case Study 1ABDC-Delayed Exchange (Existing Property)Direct Format
  • CAMPGROUND FOR SEVERAL SINGLE FAMILYRESIDENCESOne campgroundexchanged for 16 newproperties……including 2 newcampgrounds.
  • 6 PROPERTIES FOR A DOZEN CONDOMINIUMSSold six properties toaggregate funds to buy……over a dozen brand newcondo units.
  • CONVERTING INVESTMENT PROPERTY TO PERSONALRESIDENCEExchange for your dreamhome, rent it for twoyears……convert it to your primaryresidence.
  • Case Study 2ACBD-Delayed/Simultaneous Exchange (Existing Property)Reverse Format - Exchange Last
  • BUYING A NEW PROPERTY BEFORE THE OLD PROPERTY SELLSNegotiated the Purchase ofa Significant NewProperty……but unable to sell a pieceof existing property in timeto do the the deal.
  • ACQUIRE A RENTAL PROPERTY FOR A FAMILY MEMBERExchange for a home forthe kids……charge fair market rent.Then gift the property.
  • Case Study 3ACBD-Delayed, Build-to-suit (or Improvement) ExchangeDirect Format
  • COMMERCIAL PROPERTY FOR RAW LAND WITHIMPROVEMENTSSell a commercialproperty……buy a vacant lot andbuild a new building.
  • Case Study 4ACBD-Delayed/Simultaneous Build-to-suit ExchangeReverse Format - Exchange Last
  • INDUSTRY SPECIFIC BUILDING ON IDENTIFIED PROPERTYBuild a new building……then sell existingproperty.
  • Case Study 5Delayed Exchange (Existing Property) Reverse Format -Exchange First
  • ACQUIRING ABUTTING PROPERTY TO PRIMARY RESIDENCEPurchasing shore frontland with bank funds……selling rental property topay down the debt.
  • 4 $imple QualificationQuestions…
  • 1. What‟cha Got?2. Howd‟ya Get It?3. What else „ya Got?4. What‟cha Want?
  • 1. What‟cha Got?– How has the property been used in theclient‟s hands?– Has there been personal use of theproperty?– Does the property include personalproperty or other intangibles?
  • 2. Howd‟ya Get It?– As the result of a previous Exchange?– Is the property from an estate or family?– How long has the property been owned?
  • 3. What else „ya Got?– Is there other property being sold?– Are there other property rights oreasements?– Any excess land associated with theirprimary residence?– Does the transaction need to be bigger,smaller or done in stages?
  • 4. What‟cha Want?– What is the short term/long term strategyfor the property?– Ideally the value should be even or up.– An important element of building wealthusing untaxed funds.– Diversification i.e. type, location, quantity.
  • Break Time…
  • Alternate Exchange OpportunitiesTHERE ARE A MYRIAD OF OTHERINVESTMENT OPPORTUNITIES THATCAN BE ACCOMPLISHED WITH ANEXCHANGE!
  • Tenants - In - CommonTENANTS-IN-COMMON (TICs) OFFER A STRESS FREEOPTION TO OWN INVESTMENT GRADE REAL ESTATETenants-in-commonAny Real Property
  • Who is a Typical TIC Investor?Courtesy of Grubb & EllisCommercial Real Estate Services
  • Why Use TICS in an Exchange?Courtesy of Grubb & EllisCommercial Real Estate Services
  • What is a TIC?Courtesy of Grubb & EllisCommercial Real Estate Services
  • Property GalleryCourtesy of Grubb & EllisCommercial Real Estate Services
  • TIC Property Characteristics• Undivided Fractional Ownership in Real Estate• Each Owner Receives a Proportional Share of NetRevenues• Under Sponsored Structure, TICs are:• Grade “A” Real Estate Investments• Professionally Managed• The Result Is A Passive OwnershipCourtesy of Grubb & EllisCommercial Real Estate Services
  • Direct Ownership vs. TICConventional Direct OwnershipProperty Exchange1031 Tenant-in-CommonProperty ExchangeLower returns on less desirable properties Higher returns on institutional-quality propertiesDifficult to comply with Section 1031 45 dayID rules; Exchangor must find propertiesEasy to comply with Section 1031 45 day IDruleswhen properties are pre-identifiedDifficult to match Section 1031 exchangedebt and equityEasy to match Section 1031 exchange debtand equityInvestor must negotiate and arrange loan Prearranged financingExpensive and time-consuming propertymanagementProfessional proven property management inplace. You receive a monthly or quarterlyincome check.Cash flow, depreciation, and appreciationpotentialCash flow, depreciation, and appreciationpotentialAbility to use the Section 1031 exchangeagainAbility to use the Section 1031 exchange againAbility to refinance and distribute proceeds“tax free”Ability to refinance and distribute proceeds “taxfree”
  • DiversificationCourtesy of Grubb & EllisCommercial Real Estate Services
  • How Does it Work?Courtesy of Grubb & EllisCommercial Real Estate Services1. Client sells investment property.2. Proceeds transferred to QI (Edmund & Wheeler)3. Client and advisor identify potential properties through a myriad ofsources within their 45-day ID period.4. Client is granted a reservation.5. Client and advisor fill out necessary paperwork to close.6. Client is on title and receives a deed to the property.7. Client assumes % interest of non-recourse financing (1)8. Client receives % interest of the income generated from the property.9. At the sale, the client receives % share of any and all potential profits.
  • Umbrella Partnership Real EstateInvestment Trust (UP-REIT)Any Real PropertyExchange!
  • What Is An UPREIT?• Similar to a Mutual Fund For Real Estate Investors.• Allows Exchanging Real Property Into OperatingPartnership (OP) Shares of Existing REITs• REITS can convert existing properties into TICs allowing 35ownership positions; then• TICs are then converted back to REIT shares andinvestors then hold shares in the REIT‟s entire portfolio.• Portfolio is professionally managed with 95% of the netincome to investors.
  • Section 721 Exchange Overview• Instead of Sellingand Exchanging,The InvestorContributesProperty to aPartnership• Receives OperatingPartnership (OP)units.
  • UPREIT Benefits• Transaction completed on a tax-deferred basis. If shares goto an estate the ultimate recipients will receive a stepped upbasis.• Transaction can be structured enabling property owner toconvert an interest in a specific property into a larger, morebalanced portfolio held by the UPREIT.• Allows an interest in illiquid individual properties to becomemore easily saleable.
  • Oil & Gas LeasesINVESTORS CAN EXCHANGE REAL PROPERTY FORINTERESTS IN PRODUCING OIL & GAS ENTERPRISESAny Real Property
  • Oil & Gas LeaseAN EXTREMELY VIABLE ALTERNATIVE FOR AN EXCHANGE.A Viable Alternative Investment for "like-kind" 1031 Exchange.• Working and Royalty Interest• Leasehold Interest Allows the Right toSearch for and Produce Oil and Gas• Fractional Owners Have the SameRights as a Single Owner and Cansubdivide or Offer for Sale on the OpenMarket
  • Oil & Gas Lease Characteristics• Liquidity• Active Secondary Market• Life of Production• Supported by Qualified 3rd Party Reports• Annual Return• Average 15% - 18% Over Term• Tax Treatment• 15% Tax Free Depletion Allowance• Valuation• Valued on the Amount of PotentialProduction
  • Oil & Gas Lease Benefits• Immediate Economic Closing With Predictable Cash Flow• Ability to Participate in the Future Production• Highly Liquid Individual Fractional Ownership• Diversification By Investing In One or Several QualifiedWorking Interests in Different Markets
  • Structured SalesSTRUCTURED SALES ALLOWS THE INVESTOR TOARRANGE FOR A FUTURE PAYCHECKAny Real PropertyExchange!
  • The Structured SaleThe Structured Sale is a method for selling appreciated assets such asreal estate and businesses that allows sellers to:• Defer capital gains taxes to future years• Collect a stream of guaranteed payments over a set number of yearsIn Addition:• Makes the transaction safer for the seller• Doesnt require the seller to acquire new property.This method was developed in 2005 and is becoming a sought aftermethod for tax deferral when selling a business or real estate.
  • The Structured Sale & Section 1031• Identified as an Alternative Strategy In ExchangeAgreement• Gives Buyer Full Title• Can Be Used When Replacement Properties Cannot BeIdentified and/or Purchased in the 45/180 Day TimeRestraints• Can Be Used For Taxable “Boot”
  • The Structured Sale & Selling a Business• There is Inherent Risk Associated With a TypicalInstallment Sale• The Structured Sale Provides a Safe Alternative• Can Be Used in an Exchange for non “like-kind” Items likegoodwill and FF&E, or;• Can be used for the entire transaction amount if the clientwants to exit the real estate class
  • The Structured Sale
  • How Do You Summarize 77 Slides?
  • Quickly!
  • Section 1031 is AnInterest Free LoanFrom The Government
  • Section 1031 is used inless than 10% of thetransactions that itshould be!
  • Real EstateProfessionals owe it totheir clients tounderstand thispowerful tool!
  • More Commissions.More Commissions.More Commissions.
  • Section 1031 is aboutRelocation andReallocation of Assetswithout Paying CapitalGains!!!
  • Any Real Property CanBe Exchanged For AnyOther Real Property!
  • Section 1031 can beused to dramaticallyincrease the value ofholdings by leveragingUncle Sam‟s money.
  • Ask the 4 Questions1. What‟cha Got2. Howd‟ya Get It?3. What Else „ya Got?4. What‟cha Want?
  • Nearly every tax payingentity qualifies for aSection 1031Exchange!
  • Personal property canalso be Exchanged.“Like-kind” is literal!
  • There are replacementoptions available forSection 1031Understand Them!
  • Tenants-In-CommonManagement Free RealEstate Investments inGrade A Properties
  • UPREITExchange into a RealEstate Investment Trust
  • Oil & GasA timely alternative toowning real-estate withthe same benefits andflexibility.
  • Structured SalesAn annuity based“Paycheck” for failedexchanges andbusiness transfers.
  • Also…• Must employ a Qualified Intermediary• Time limits of 45 and 180 days• Properties must be “Like-Kind”• Business or Investment Purpose• Relinquished and Replacement Properties heldby same taxpayer• Exchanges can be done either forward or reverse
  • If you have questions.If your clients havequestions.If you want tostrategize…..
  • Congratulations!You are now a member of the elite, theproud, the educated….Edmund & Wheeler, Inc.Alumni AssociationMembership has it‟s benefits!www.section1031.com/alumni
  • …Contact UsFor over 27 Years Edmund & Wheeler has helpedclients to defer $Millions…
  • Thank you for yourvaluable time!!!