IRC1031 Overview

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A quick overview of IRC1031 Like-Kind Exchanges

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IRC1031 Overview

  1. 1. New England’s 1 st Authority on IRC §1031 Exchange www.exchangeauthority.com
  2. 2. WHAT IS A TAX DEFERRED EXCHANGE? <ul><li>Authority IRC §1031 </li></ul><ul><li>Method to Defer Tax on Profit (Gain) </li></ul><ul><li>Tax Free Exchange </li></ul><ul><li>Interest Free Government Loan </li></ul>
  3. 3. QUALIFYING PROPERTY <ul><li>Property held for the “PRODUCTIVE USE IN A TRADE OR BUSINESS” </li></ul><ul><li>Property held for “INVESTMENT” </li></ul>
  4. 4. EXCHANGE MYTHS <ul><li>The 2 Party Swap </li></ul><ul><li>Like Kind Limitations </li></ul><ul><li>Apartments for Apartments </li></ul><ul><li> Land for Land </li></ul><ul><li>Simultaneous Transfer </li></ul><ul><li>Equal Value Properties </li></ul>
  5. 5. DEFINITION OF LIKE-KIND <ul><li>Real Estate: § 1.1031(a)-1(b) </li></ul><ul><li>Like Kind has reference to the nature or character of the property and not to its grade or quality. </li></ul><ul><ul><li>Improve for unimproved </li></ul></ul><ul><ul><li>City real estate for a farm or ranch </li></ul></ul><ul><ul><li>30 year leasehold for fee interest </li></ul></ul>
  6. 6. DEFINITION OF LIKE-KIND <ul><li>Tangible Personal Property: §1.1031(a)-2(b) </li></ul><ul><li>Depreciable tangible personal property is Like Kind to other depreciable tangible personal property it is Like Class </li></ul><ul><ul><ul><li>Within the same General Asset Class of Revenue Procedure 87-56 </li></ul></ul></ul><ul><ul><ul><li>Within the same Product Class within Division D of the Standard Industrial Classification Manual (“SIC Manual”) </li></ul></ul></ul>
  7. 7. DEFINITION OF LIKE-KIND <ul><li>Intangible Personal Property: §1.1031(a)-2(b) </li></ul><ul><li>Intangible personal property is Like Kind to other intangible personal property if </li></ul><ul><ul><ul><li>The nature and character of the rights and interests are Like Kind, and </li></ul></ul></ul><ul><ul><ul><li>The nature and character of the underlying property to which the intangible personal property relates is also Like Kind </li></ul></ul></ul>
  8. 8. DEFINITION OF LIKE-KIND <ul><li>Intangible Personal Property: §1.1031(a)-2(b) </li></ul><ul><li>Example </li></ul><ul><li>A copyright of a song is Like Kind to a copyright of another song but NOT Like Kind to a copyright of a novel </li></ul><ul><li>Goodwill and Going Concern of a business is NOT like Kind to the Goodwill and Going Concern of any other business </li></ul>
  9. 9. NON-QUALIFYING PROPERTY (“BOOT”) <ul><li>Cash </li></ul><ul><li>Stocks, Bonds & Securities, Notes </li></ul><ul><li>Partnership Interests or Beneficial Interests </li></ul><ul><li>Inventory, “Dealer Property” </li></ul><ul><li>Property Held For Personal Use </li></ul>
  10. 10. MECHANICS OF A TYPICAL EXCHANGE EXCHANGOR DEED Relinquished DEED DEED BUYER SELLER DEED Replacement
  11. 11. Legislative Changes - 2008 <ul><li>Regulation 468b – exchanges with over $2 million in escrow </li></ul><ul><li>Rev. Pro. 2008-16 – Vacation Homes / 2 nd Homes </li></ul><ul><li>Housing Assistance Tax Act 2008 – Fannie Mae / Freddie Mac bailout and IRC §121 Amendment </li></ul>
  12. 12. Legislative Changes – 2008 cont’ <ul><li>Amendment to Partnership Form 1065 </li></ul><ul><li>IRS 2008-2009 Priority Guidance </li></ul><ul><li>Mutual Irrigation Ditch, Reservoir, or Irrigation Company Stock </li></ul>
  13. 13. 9 Leominster Connector, Suite 1 Leominster, MA 01453 P (978) 433-6061 www.exchangeauthority.com

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