1031 Blog

Multiple Ownership Raises Complex Issues

Q. In 1989, my husband and brother purchased a condo in Florida for $130,000. In March 2004, my husband's brother was no longer interested in owning the condo, and we bought him out for $90,000 since we established the market value at $180,000.

Prices have gone up a lot since then, and the property is now worth $270,000. We plan to sell the condo in a few months.

What are the tax implications for us? Will our profit be a long-term capital gain since we will have owned my brother-in-law's share for just over a. . . full Q&A here.

IRS Grants Private Letter Ruling to Geneva

MINNEAPOLIS, MN -- The IRS has granted a favorable Private Letter Ruling to The Geneva Organization. This ruling provides TIC investors with the assurance that Geneva's 1031 exchange program is in accordance with IRS taxation law and clarifies many of the uncertainties associated with the TIC structure and its. . . full release here.

The new 1031 tax-free exchange

By William F. Hague

The average American's individual retirement account (IRA) is generally worth more than their home. With the exception of the few who own "overheated" property here on Marco Island, the IRA often represents investors' largest pool of assets.

Now, before anyone gets up in arms, let me qualify the "overheated" comment. It's never normal or healthy for any particular environment to experience such a drastic and radical movement as the swing in property values on Marco Island in the last 12 months. Given that all things run in cycles - the stock market, the economy, even professional sporting teams - whenever there's a sudden and extreme action (the recent run-up in prices), there's usually an equal and opposite reaction.

I know it's not a subject that anybody wants to address, but history always seems to repeat itself. If you want to see proof, go to the Collier County Property Appraiser Web site and look for properties that you know have changed hands recently. You may see as many as two or three transactions in as little as six months.

How about one particular Marco Island parcel that sold for $525,000 in February 2004, then again in March 2004 for $715,000, and yes, yet again in May 2004 for $899,000. The only thing more unbelievable is that someone actually paid the. . . full story here.

Evergreen Development Acquires $18.5M Apartments near University of Kansas

PASADENA, Calif.--(BUSINESS WIRE)--Jan. 25, 2005--Evergreen Development, LLC recently purchased the 208-unit "Pinnacle Woods" garden apartment designed for collegiate living near the University of Kansas in Lawrence, KS as a 1031 Exchange $18,500,000 private placement of securities.

"This is our third acquisition of a property oriented towards independent living for students in university settings in the past three months," according to Luke V. McCarthy, CEO of Evergreen. "We have several more similar acquisitions in the pipeline for private investors wishing to defer taxes on sale of their current property or properties," he said.

Financing was through PNC Bank at 5.21% per annum for 10 years; interest only for the first two years and then the principal amortized over. . . full release here.

SL Green Realty Corp. Reports Fourth Quarter FFO of $0.95 Per Share and Full Year FFO of $3.77 Per Share

NEW YORK--(BUSINESS WIRE)--Jan. 24, 2005--SL Green Realty Corp. (NYSE:SLG)

SL Green Realty Corp. (NYSE: SLG) today reported funds from operations available to common shareholders ("FFO") of $0.95 per fully diluted share for the fourth quarter ended December 31, 2004, a 6.7% increase over the same quarter in 2003. The Company also reported FFO of $3.77 per fully diluted share for the year ended December 31, 2004, an 8.3% increase from the prior year, which was $3.48 per fully diluted share.

Net income available to common shareholders was $111.5 million for the fourth quarter and $193.2 million for the year ended December 31, 2004, an increase of $89.8 million and $102.8 million from the respective periods in 2003. Net income available to common shareholders also increased $91.2 million from the third quarter of 2004, primarily due to gains recognized on the. . . full release here.

Portland skyline poised for significant makeover

By TUX TURKEL, Portland Press Herald Writer
Copyright © 2005 Blethen Maine Newspapers Inc.

When James Harnden stares at an aerial photograph of Portland's peninsula, he can visualize the city five years from today.

The photo offers a bird's-eye view of Franklin Arterial from Interstate 295 to the waterfront.

As Harnden's eyes travel uphill through the Bayside neighborhood, they take in: a 50,000-square-foot supermarket and parking garage; a 100-unit housing complex; a combination convention center-arena-hotel-office tower on Congress Street that spans two city blocks.

As his eyes begin the downhill trip toward the waterfront, his view of the near future takes him past a just-completed six. . . full article here.

American Jobs Creation Act and 1031

REALTY MAILBAG
BY ROBERT J. BRUSS

Reprint from Special to The Herald

Q: In October 2004 the American Jobs Creation Act was passed by Congress and signed by President Bush. It refers to Internal Revenue Code 1031 tax-deferred exchanges. We did such an exchange in 2001. Before selling the house we acquired, we plan to live in it and then sell to avoid the capital gains tax. The new rule is you can't sell the property acquired in such an exchange unless you have owned it more than five years. Does the owner now have to live in the house for five years, or is it still the old two out of last five years before the sale?

A: The only change made was that for a rental property acquired in an IRC 1031 tax-deferred exchange to qualify for the $250,000 principal residence sale tax exemption of IRC 121, the acquired property must now be held at least five years. You still must occupy it as your principal residence at least two of the five years before sale.

Of course, at the time of acquisition, it must be a rental property. To show rental intent, most tax advisors suggest renting it at least a year before converting to your principal residence.

Blevins Family Storage buys Corporex park for $8.1M

By Brian Forrester

Blevins Family Storage paid $8.1 million to Corporex Key Limited Partnership No. 8 earlier this month for the Corporex Business Park at 1645 Murfreesboro Pike.

Blevins Family Storage purchased the property using 1031 exchange money from the sale of Abbott Self Storage on Charlotte Pike and another property in east Nashville. A 1031 exchange allows a real estate owner to sell a property and defer paying capital gains by using the money to buy another piece of property.

"I feel that self-storage is still over built in Nashville and it was a good time to sell," says Bill Blevins, general partner for. . . full story here.

Roberts Realty Investors, Inc. Acquires Land on Peachtree Dunwoody Road

ATLANTA, Jan. 21, 2005 (PRIMEZONE) -- Roberts Realty Investors, Inc. (AMEX:RPI) announced today the purchase of 9.84 acres located on Peachtree Dunwoody Road across the street from MARTA's North Springs rail station in the affluent Perimeter Center submarket of Atlanta. The property was acquired for $15,700,000 from Roberts Properties Peachtree Dunwoody, LLC, which is owned and controlled by Mr. Charles S. Roberts, the CEO of Roberts Realty. Roberts Properties Peachtree Dunwoody, LLC purchased the property in 1999, then spent two years rezoning it and a year successfully defending a homeowners' lawsuit against Fulton County that challenged the rezoning.

The property is zoned for a mixed-use development of 120 condominium units, 236 apartment units, 210,000 square feet of office space and 56,000 square feet of retail space. Mr. Charles S. Roberts, the company's founder and CEO, stated: "We plan to develop the apartments and. . . read the full press release here.

Know 1031 rules for exchanging

By Sue Thompson

Dear Sue,

I am about three years away from retirement. I have been working towards my retirement by buying real estate.

Most of my property purchases have been single family residential. I was mentored by an old family friend.

He said that single family homes appreciate faster than multiple units because there are more buyers for them. He said that multiple unit properties produce income but don't necessarily appreciate at the rate that most residential properties do.

I followed his sage advice and bought several homes over the years. All of them have at least. . . read the full Q&A here.