Section 1031 of the US tax code allows companies to defer capital gains taxes when selling business or investment assets and reinvesting the proceeds into similar "like-kind" replacement assets. This is called a 1031 like-kind exchange (LKE). It allows sellers to convert what would be paid in taxes into cash that can be reinvested back into the business. Common assets involved in 1031 exchanges include real estate and equipment used in industries like oil and gas, manufacturing, and transportation. To qualify for a 1031 exchange, the seller must use a qualified intermediary and identify possible replacement assets within 45 days and complete the purchase within 180 days.

1. 1031 Like-Kind Exchanges: Maximizing Cash Flow, Minimizing Risk and Administrative Burden 6/1/2010 Copyright 2010 by Accruit, LLC: the only comprehensive, fully integrated 1031 like-kind exchange solution in America.

2. Q: What is a 1031 Like-Kind Exchange (LKE)? Section 1031 of the tax code Allows companies buying and selling assets to defer recognition of the gain on sale if they reinvest proceeds in “like-kind” assets Established part of tax law – since 1921

3. Q: What’s the Value of a 1031 Exchange? (Why Should Independent Producers Care?) Cash: Gain on a sale is usually ~40% (have seen rates approaching 50%; depends on state tax rates) Without LKE: sell $1M worth of real estate or equipment, pay IRS ~$400,000 With LKE: sell 1M worth of real estate or equipment, defer gain, reinvest ~$400,000 back into your business Deferral is indefinite

4. Q: What Kinds of Assets are Eligible? 1031 exchanges best known in Real Estate Also used in “personal property”: misnomer; refers to all non-real estate assets held for business/investment use Tangible assets like oil & gas equipment (incl. tubing and casing), energy generation and transmission equipment, heavy equipment, fleet, manufacturing equipment, etc. Certain intangibles, like mineral rights, patents and licenses

5. Q: What Kinds of Assets are Eligible? Real Estate: ALL real estate is like-kind Oil & Gas Field Machinery Examples:

6. Oil and Gas Interests (Real Property) Working or Operating Interests Lessee’s interest is considered a real estate interest for Federal income tax purposes May contain equipment/other tangible property, giving rise to a “multi asset” exchange Royalties Also considered real property interest for Federal tax purposes and would be exchangeable Less likely to contain personal equipment; no “multi asset” exchange component Production Payments Right to a mineral in place for specified amount, payable out of a percentage of the minerals Considered “carved out” and not real property for Federal income tax purposes

7. Q: How do 1031 Exchanges Work? Structure sale as an LKE in advance (notification) Tax code requires involvement of a Qualified Intermediary (QI - disinterested third party) 45 days to identify replacement asset 180 days to complete the transaction Cash must come to the QI

8. Several kinds of LKE Simultaneous Exchange Forward Exchange Reverse Exchange

9. About Accruit: Largest business asset Qualified Intermediary Annual volume: Over $6 billion in LKE transactions $8B in assets under management 250,000 exchange transactions per year Only patented 1031 exchange process in the nation 500+ clients in over 20 industries Billions of dollars of tax liability converted to operating cash flow One-to-one client service 6/1/2010 Copyright 2010 by Accruit, LLC: the only comprehensive, fully integrated 1031 like-kind exchange solution in America. 9

10. About Accruit: Strong Partnerships Preferred or Exclusive Provider Relationships: PLS, Network International, Ritchie Bros., EnergyNet, Associated Equipment Distributors, FIS, NationaLease, IdeaLease CPAs: Deloitte, RSM McGladrey Network, BDO Seidman, The Leading Edge CPA Alliance, Moss Adams Board Seat on Federation of Exchange Accommodators (FEA); CEO Brent Abrahm is President-elect, 2011 Direct state and federal regulation of Qualified Intermediary industry 6/1/2010 Copyright 2010 by Accruit, LLC: the only comprehensive, fully integrated 1031 like-kind exchange solution in America. 10

11. Q&A Questions? 6/1/2010 Copyright 2010 by Accruit, LLC: the only comprehensive, fully integrated 1031 like-kind exchange solution in America. 11

12. Let’s Talk 6/1/2010 Copyright 2010 by Accruit, LLC: the only comprehensive, fully integrated 1031 like-kind exchange solution in America. 12