1031 Blog

IRS rules enable homeowners to get the 'boot'

By Tom Kelly

The Internal Revenue Service issued what appears to be a surprise box of Valentine's candy for homeowners and investors seeking to use their former principal residence in a tax-deferred exchange.

However, much like a long-term relationship, the rules require a considerable amount of patience to understand.

On Feb. 14, new guidelines were adopted that would allow investors who kept their home and used it as a rental property under IRS Code 121 to eventually buy down and take cash out of the deal without facing federal income tax liability. This money, known as "boot" in tax circles, previously was taxed.

The new rule, which enables taxpayers to combine Code 121 with the popular Code 1031 for tax deferred exchanges, is retroactive to. . . full story here.

Evergreen Completes $29.6M Purchase of Fishers, Indiana Single-Tenant Office Building

PASADENA, Calif.--(BUSINESS WIRE)--Feb. 23, 2005--Evergreen Development, LLC today announced the purchase of a single-tenant commercial facility for $29,600,000 in Fishers, IN as a 1031 Exchange private placement of securities.

The 736,000 gross sq. ft., one-story building serves as a major distribution center for Universal Music & Video Distribution Corporation, a subsidiary of the Fortune 500 Vivendi Universal S.A. (NYSE:V), the number two media group in the world.

The acquisition was on behalf of individual tenant-in common investors of regional securities broker/dealers in a 1031 Exchange private placement of securities in a tax-deferred transaction.

Fishers Indiana Distribution Center is located at 9999 East 121st Street. The facility was constructed in 1993 and expanded in 2000. There is a warehouse area and an independent office area situated on approximately 35 acres.

Universal Music & Video Corporation's global operations include the development, manufacturing, marketing, sales and distribution of recorded music through a network of subsidiaries, joint ventures and. . . full release here.

1031 Tenant in Common Industry Anticipates Record Growth in 2005

(PRWEB) February 22, 2005 -- On January 7, 2005, Triple Net Properties, LLC, announced the acquisition of 4 Hutton on behalf of Tenant in Common investors.

The Class A, 210,041 square-foot, 10-story office building is located in the South Coast Metro submarket of Orange County, California was bought for approximately $53.3 Million. The property is currently 76% leased to 18 tenants including Carter & Burgess, First Pacific Financial, Borland Software and LandAmerica. 4 Hutton is strategically located in a rapidly expanding commercial neighborhood that is one of the most sought-after office environments in Orange County.

This acquisition demonstrates the growth of the 1031 Tenant-in-Common (TIC) Industry and its appeal for investors seeking the benefits of 1031 exchange, and the Q1 2005 Edition of. . . full release here.

Feds sweeten capital gains exclusion

The Washington Post

WASHINGTON - Got an expensive house you want to sell but don't want to pay a bunch of tax on the profit? The Treasury Department has got a deal for you.

Resolving questions that have been circulating ever since Congress changed the law in 1997, the department has concluded that homeowners can combine the capital gains exclusion available on the sale of a principal residence with the tax deferral available when an investment property is exchanged for one of "like kind."

In essence, the Treasury has said that if a homeowner lives in a house (Property A) long enough to meet the principal-residence requirements, he or she may then rent it out for a year or two (presumably during a two-year sabbatical in Tahiti), and then - by jumping through certain hoops - sell Property A, invoke the principal-residence exclusion to keep the first $250,000 of profit tax-free if single, $500,000 for a married couple, and plow any remaining profit into. . . full story here.

Rules exist to avoid capital gains tax

By MARY DEIBEL
Scripps Howard News Service
February 17, 2005

- Skyrocketing home prices have most Americans sitting pretty - until it's time to sell. Then they need tax-savvy strategies to make sure they don't mistakenly take a big tax hit on their profit.

Times have changed and so have home sale profits in the eight years since federal tax law eliminated the old rollover rules. They sheltered all the profits on house sales from capital gains taxes if you bought a more expensive house.

Now the rules let you keep up to a $250,000 tax-free profit from selling your principal residence, or $500,000 for couples, so long as you meet two tests:

- You must have owned the property at least two of the last five years.

- The house must be your principal residence during two of the five years. You may qualify for a partial tax break if you move for "unforeseen. . . full story here.

1031 Exchange Securites Private Offerings at Evergreen Development Top $290M in 2004

PASADENA, Calif.--(BUSINESS WIRE)--Feb. 15, 2005--Evergreen Development, LLC sponsored $290,790,791 in private placements of securities to acquire 11 garden apartment and commercial/industrial properties in 2004, more than double the amount invested in 2003 for a total of $475,712,377 since 1999.

"We are seeing explosive growth in demand by private investors to capitalize on tax-deferral advantages in our fifth year of providing tenant-in-common investment opportunities under 1031 Exchange provisions in the Tax Code," according to Luke V. McCarthy, CEO of Evergreen.

"We expect to outpace the industry growth trend with similar investments to the clients of more than 100 securities broker/dealer firms and financial advisory services in 2005," he said.

"In the second half of 2004, we developed a niche and found an eager market for special types of garden apartments for student housing that we have offered as 'collegiate living' alternatives," McCarthy said. "Investors see value in the growing demand for quality living conditions with. . . full release here.

How tax-deferred trades avoid tax on investment realty sales

If you own (or want to own) an investment property, it can become the basis for increasing your real estate wealth by making periodic trades up for larger properties.

For example, my first tax-deferred exchange was a trade of my little three-unit apartment building for a larger nine-unit apartment building that offered fix-up profit potential. If I had not made that tax-deferred exchange, as authorized by Internal Revenue Code 1031, the profit on the sale of my three units would have been eroded by capital gain taxes.

Many real estate fortunes have been earned as a result of repeated tax-deferred trades for larger and larger properties. The best-selling classic real estate book, "How I Turned $1,000 into $5 Million in My Spare Time," by William Nickerson, is based on the author's tax-deferred exchanges to pyramid his way to wealth.

WHAT IS A TAX-DEFERRED EXCHANGE?

To qualify for tax-deferral when selling a property, an investment realty owner must trade "equal or up" in both price and equity for one or more qualifying "like kind" properties without taking out any taxable "boot" such as cash or net mortgage relief. If the owner receives any cash or net mortgage relief in the trade, that amount is taxable.

However, "like kind" does not mean "same kind" of property. To illustrate, you can trade your rental house for a tenant in common share in a management-free commercial building. Or you could trade your. . . full story here.

A good IRS deal for aging house-proud boomers

By ALBERT B. CRENSHAW

WASHINGTON - Got an expensive house you want to sell but don't want to pay a bunch of tax on the profit? The Treasury Department has a deal for you.

Resolving questions that have been circulating ever since Congress changed the law in 1997, the department has concluded that homeowners can combine the capital-gains exclusion available on the sale of a principal residence with the tax deferral available when an investment property is exchanged for another of "like kind."

And, said Robert Schachat, of the Washington office of accounting firm Ernst & Young, it does so in a way that allows "the most beneficial combination" of the two provisions.

The interpretation comes at a perfect moment for aging baby boomers living in areas where home prices have gone off the charts. It could give new meaning to the term "house-proud."

In essence, the Treasury has said that if a homeowner lives in a house (Property A) long enough to meet the principal-residence requirements, he or she may rent it out for a year or two (presumably during a two-year sabbatical in Tahiti) and then - by jumping through certain hoops - sell Property A, invoke the principal-residence exclusion to keep the first $250,000 of profit tax-free if single, $500,000 for a married couple, and plow any remaining profit into. . . full story here.

TIC 1031 Exchange Properties – The High Yield Solution

A popular choice among real estate investors seeking a 1031 replacement property is Tenant-in-Common (TIC) ownership, or fractional interest. As a TIC owner, you have an undivided fractional interest in an entire property and share in your portion of the net income, tax shelters, and appreciation.

(PRWEB) February 7, 2005 -- While many savvy investment property owners recognize this as an opportune time to dispose of their property, they are also discouraged to find that it is an unpleasant market to locate a suitable exchange property.

Each TIC owner receives a separate property deed and title insurance for their portion in the property investment. This gives you the same rights of ownership that a single owner would enjoy. Because TIC offerings are often “packaged” with management and financing in place, TICs simplify the 1031 process for the passive real estate investor.

TIC investments provide simplicity by eliminating active management headaches. Individuals who are ready to relinquish the day-to-day burdens of being a landlord, or who own land and would like an income-producing property, will benefit from TIC investments. TIC programs provide a. . . full release here.

Commercial Capital Bancorp, Inc. Announces Agreement to Acquire TIMCOR Exchange Corporation

Commercial Capital Bancorp, Inc.and TIMCOR Exchange Corporation announced today the signing of a definitive agreement ("Agreement") in which the Company will acquire TIMCOR in an all stock transaction with a fixed value of approximately $29.4 million. TIMCOR is a leading "qualified intermediary", which facilitates tax-deferred real estate exchanges pursuant to Section 1031 of the Internal Revenue Code of 1986. TIMCOR was founded in 1977 and has experienced 29% annual growth in transactions since 1995, with over 7,000 transactions completed in 2004, an increase of 21% from 2003. Though TIMCOR facilitates exchange transactions nationwide, through its headquarters in Los Angeles, California and offices located in Texas and Florida, the majority of its transactions are with income property real estate investors in California. The transaction, which is subject to the satisfaction of certain closing conditions, is not subject to shareholder or regulatory approval and is expected to. . . full release here.