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Current trends of 1031 exchange and Info (1)

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Get detail what is trending in 1031 exchange Industry. Read about key points to remember regarding 1031 Exchanges. For complete understanding terminology of 1031 exchange visit us at 1031sponsors.com – PowerPoint PPT presentation

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Date added: 7 October 2019
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Title: Current trends of 1031 exchange and Info (1)


1
1031 Exchanges

PRESENTED BY Angilina Taylor Exchange
Specialist 1031 sponsors.com
2

ABOUT My Company
  • Exchange Specialist
  • Over 15 years in 1031 industry
  • Involved in exchanges of various size and
    complexity

3

TODAYS in 1031 Exchange exchang
  • Current 1031 trends
  • Anticipated 1031 activity over next decade
  • Quick overview of 1031 exchanges
  • Using your 1031 knowledge to your advantage
  • Selecting a Qualified Intermediary (QI)
  • FAQ 1031 exchange

4

1031 EXCHANGE
  • WHAT IS A 1031 EXCHANGE?
  • A 1031 exchange (IRS Code Section 1031) gives an
    option to the investor by reinvesting the
    proceeds from the sale of investment property
    (known as the relinquished property) into
    qualified replacement property to defer capital
    gains tax.
  • Not for primary residences, flips or most
    vacation homes.

5

1031 BENEFITS
Immediate Tax Avoidance Time Value of Deferral Increased cash flow/Income Increased purchasing power Increased ROI Less Management CONSOLIDATION DIVERSIFICATION Future conversion to primary residence or vacation home Possible elimination of gain
6
The Power of a 1031 Exchange

7

TAX FACTS AND RATES
  • CAPITAL GAINS
  • 20 for taxpayers with ordinary incomes exceeding
    400,000 (450,000 for married taxpayers)
  • 15 for incomes more than approx. 36,000
    (71,000 for married taxpayers) and less than
    400,000 (450,000 for married taxpayers)
  • 0 for incomes less than approx. 36,000 (71,000
    for married taxpayers)
  • Consult tax advisor to determine actual tax
    rates.

8

STATE INCOME TAX
  • Each state has different rules regarding
    exchanges.
  • Pennsylvania generally does NOT recognize a
    1031 exchange.
  • Many states simply follow the Federal Code or
    have adopted similar regulations
  • Some states have special requirements such as
    the replacement property must be located
    within the state

9

CURRENT TRENDS
  • Triple Net PROPERTIES
  • Investors are taking advantage of current CRE
    market opportunities and historically low
    interest rates to leverage into several
    replacement properties

10
  • SHORT EXCHANGE PERIODS
  • Exchangers are lining up their replacement
    property and are ready to acquire it immediately
    after conveying the old property to a buyer
  • Average exchange is now completed within 45 days
    (down from average of 180 days just two years
    ago)

11
REVERSE EXCHANGES
  • More and more investors are finding the ideal
    replacement property before lining up a buyer
  • Must be structured several weeks in advance

12

CURRENT TRENDS
  • EXCHANGING PROPERTY WITH NO GAIN
  • Investors are exchanging properties with little
    or no gain, maybe even selling at a loss, to
    avoid costly depreciation recapture

13

LIKE-KIND EXAMPLES
  • Examples of like-kind real estate
  • , rental house
  • Office building, warehouse, shopping center
  • Land
  • Tenant-in-Common (TIC) interest
  • Conservation easements, utility easements
  • Leasehold interest of 30 years (including
    options)

14

LIKE-KIND DEFINED
  • One of the major requirements of Section 1031 is
    that the replacement property must be like-kind
    to the relinquished property. In other words,
    both relinquished and replacement properties must
    be similar in nature, though they may not serve
    the same purpose. For example, using a 1031
    exchange, you can exchange any investment
    property (rental, industrial, multi-family, etc.)
    for another and defer up to 100 capital gains
    tax.

15

10 31 exchange deadlines
  • QI acts as middleman to facilitate an exchange
  • Exchanger cannot have access to exchange proceeds
  • Time Periods
  • Replacement Property must be identified within
    45-Day Identification Period
  • Replacement Property must be acquired within
    180-Day Exchange Period
  • Title must be held in the same name as
    relinquished property

16

1031 ADDITIONAL REQUIREMENTS
  • Exchange must be set up (and 1031 docs signed)
    before title passed to buyer
  • To maximize deferral, replacement property must
    have equal or greater VALUE and EQUITY.

17

Selecting your QI
  • Your QI is your partner throughout the exchange
  • A QI handles the mandatory mechanics of a 1031
    exchange for an investor. 
  • Have following responsibility
  • Acquire relinquished properties from the
    taxpayer.
  • Transfer the relinquished property.
  • Acquire the replacement property.
  • Transfer the replacement property to the taxpayer

18

SUMMARY
  • 1031 exchanges are a great wealth accumulation
    vehicle.
  • Great way to accomplish long-term objectives
  • Excellent estate planning tool
  • Creates many opportunities to grow your business
  • The more you know, the more you will benefit.
  • 1031 sponsors.com. can help!
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