1031 Tax Deferred Exchanges

Presented by Matthew Scheriff – 2.5 hours

  1. Introduction & Overview of IRC §1031 Tax Deferred Exchanges (10 minutes)
    1. What does a 1031 exchange do?
    2. Brief history of 1031 exchange
    3. Current uses for 1031 exchanges in real estate transactions
  2. Investor motivations for using a 1031 exchange (10 minutes)
    1. Preservation of wealth
    2. Quality of life issues
    3. Product and geographic diversification
    4. Beneficial cash flow
  3. Definition of “like kind” property  (20 minutes)
    1. Myths about “like kind” property
    2. Legal definition
    3. Intent of person or entity owning property
    4. Examples of property which would not be considered “like kind”
      1. Cooperative apartments
      2. Second homes
      3. Rehabilitation properties
    5. Brief overview of personal property exchanges
    6. Less than fee interests of real property
  4. Rules to obtain a complete deferral (15 minutes)
    1. Trade up
    2. Roll all proceeds forward
    3. Same taxpayer requirement
    4. Boot defined
  5. Exchange Safe Harbors defined (15 minutes)
    1. Use of a Qualified Intermediary
    2. Qualified escrow or trust account
    3. Use of a security agreement or arrangement
    4. Interest paid on exchange funds
  6. Time limits for a delayed exchange  (10 minutes)
    1. 45 day rule
    2. 180 day rule
      1. Federal tax return filing consequences
  7. Identification rules  (10 minutes)
    1. 3 property rule
    2. 200% rule
    3. 95% exception
    4. Procedure for a proper identification
  8. Exchange vesting issues (10 minutes)
    1. Requirement for same party on sale and purchase
    2. Limited exceptions to these rules
    3. Partnership and corporation dissolution issues
  9. Parking Arrangements (15 minutes)
    1. Reverse exchanges
    2. Improvement exchanges
    3. Reverse improvement exchanges
  10. Retirement and estate planning issues (15 minutes)
    1. Combination §1031 and §121 exchange
      1. How the primary residence capital gains tax exclusion can be used
    2. Retirement and estate planning ideas
      1. Purchase your vacation or retirement home
      2. Triple net lease; TIC properties and REITs
  11. Financing considerations (10 minutes)
    1. Refinancing of IRC §1031 Tax Deferred Exchanges
      1. Relinquished property – prior to or during exchange
      2. Replacement Property – after completion of exchange
    2. Seller Financing
      1. Installment note treatment
      2. Incorporate into 1031 exchange
        • Infuse money
        • Sell off note
  12. Replacement property options (10 minutes)
    1. Triple net leased retail sites
    2. Tenant-in-common programs
      1. Pros / cons
      2. IRS and SEC considerations