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§1031 Exchange Terminology
 Boot
 Cash Boot
 Constructive Receipt
 Direct Deeding
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 Exchanger
 Exchange Agreement
 Exchange Period
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§1031 Exchange Terminology
 Identification Period
 Like-Kind Property
 Mortgage Boot
 Qualified Intermediary
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 Relinquished Property
 Replacement Property
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Poll question 01.
Sec. 1031 is part of the?
A
Constitution
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B
State Statue
C
Internal Revenue Code
D
Real estate commission rules
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Internal Revenue Code §1031
Non-Recognition of Gain or Loss
from Exchange Solely of Kind
“No gain or loss shall be recognized on the exchange
of property held
for productive use in a trade or
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business or for investment if such property is
exchanged solely for property of like-kind which is to
be held either for productive use in a trade or business
or for investment.”
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§1031: Exceptions
 Stock in trade or other property held primarily for sale
 Stocks, bonds, or notes
 Other securities or evidences of
indebtedness or interest
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 Interests in a partnership
 Certificates of trust or beneficial interest
 Choses in action
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History of IRC §1031 / Capital Gain Tax
1989
Revenue Reconciliation Act of 1989
1984
Deficit Reduction Act of 1984
1921
Revenue Act of 1921
1921
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1979
1979
Starker Tax Court Cases
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1984
1986
1989
1986
Tax Reform Act of 1986
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History of IRC §1031 / Capital Gain Tax
1991
Final Treasury Regulations
1991
September 15, 2000
Rev. Proc. 2000-37
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1997
1979
Tax Relief Act
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2000
2003
May 6, 2003
Jobs & Growth Reconciliation Act
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Poll question 02.
Congress first allowed the exchange of properties in:
A
1969
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B
1984
C
2001
D
1921
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Relevant Issues
 Investors can potentially defer 100% of their capital gain taxes, both state
and federal
 Liability
 Increase your income
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 Competition
 Client Benefits
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Investor Motives
Investors increase their rate of return by using:
 Leverage
 Diversification
 Consolidation
 Cash Flow
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 Management Relief
 Increase Depreciation
 Estate Planning
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Definition of Like-Kind Property
Real Property for Real Property
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Feedback question 03.
What would not be considered like-kind property to an office building?
A
Apartment building
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B
Vacation rental properties
C
Retail center
D
Primary Residence
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Feedback question 03.
What would not be considered like-kind property to an office building?
A
Apartment building
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B
Vacation rental properties
C
Retail center
D
Primary Residence
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Like-Kind Issues: Holding Period
Time is only one factor
The Taxpayer’s “intent” is the key issue
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Like-Kind Issues: Holding Period
Time is only one factor
The Taxpayer’s “intent” is the key issue
One Perspective
24 months or more
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 In PLR 8429039, the IRS stated
that a minimum holding
period of two years would be
sufficient.
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Like-Kind Issues: Holding Period
Time is only one factor
The Taxpayer’s “intent” is the key issue
One Perspective
Second Perspective
Minimum of 12 months
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 Straddles two tax filing years.
 In PLR 8429039, the IRS stated
that a minimum holding
 Over 12 months qualifies for
period of two years would be
long-term capital gain treatment.
sufficient.
 Attempt by Congress in 1989 to
impose one year holding period
(which didn’t pass).
24 months or more
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Like-Kind Property Issues
 Interests in a partnership
 Property within the United States
 FRPTA and SRPTA
 Personal Property
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 Fee for Leasehold (30+ years)
 Vacation/Second Homes
 Property Held for Resale
 Related Party Exchanges
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Like-Kind Property Issues- Vacation Homes
Revenue Procedure 2008-16
Creates safe harbor for vacationwww.Mckissock.com
home
exchanges.
IRS will consider a dwelling unit held for
investment if certain requirements are met.
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Like-Kind Property Issues- Vacation Homes
Barry E. Moore v. Comm., T.C. Memo. 2007-134:

The taxpayers never rented or attempted to rent the property.

The taxpayers deducted mortgage interest as a “home mortgage interest”
expense rather than investment interest expense.

The taxpayers did not take (and
possibly did not qualify for) depreciation or other
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tax benefits associated with investment property, including deductions or
maintenance expenses.
Planning Strategies:

Substantiate investment intent.

Report rental income, attempts to rent property or conversion from a second
home to a rental property held for investment.

Treat property as held for investment on the tax return.
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Like-Kind Property Issues- Vacation Homes
Exchanges of vacation homes held for investment are possible, provided the primary
reason is holding for investment and not for personal use.
Conservative (“Safer”)
1
Revenue Procedure 2008-16
2
Safe Harbor
3
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4
5
Range of possible
vacation home exchanges.
6
7
8
Moore vs. Comm. 2007-134
Non-Safe Harbor
9
10
Aggressive (“Riskier”)
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Related Party Rules
Who is a Related Party?
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Related Party Rules
Four Different Scenarios:
1. Simultaneous Exchange
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2. Delayed – Selling to a Related Party
3. Delayed – Purchasing from a Related Party
(See Rev. Ruling 2002-83, PLR 9748006)
4. Delayed – Purchasing from a Related Party who is Exchanging
(See PLR 2004-40002)
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Internal Revenue Code §121
 Married Taxpayers, filing a joint return, can exclude up to $500,000
 Single filers can exclude up to $250,000
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 Home must be primary residence of both spouses for 2 of the last 5 years
 §121 exclusion available once every two years
 Vacation/second homes do not qualify
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Jobs & Growth - Reconciliation Act-2003
Federal Capital Gain Tax Changes

Rate reduced to 15% (from 20%) for Taxpayers in the top tax bracket

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Rate reduced to 5% for Taxpayers in the 10% and 15% tax brackets

Retroactive to May 6, 2003
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Treasury Decisions 9152
Taxpayers may exclude gain from principal residence even though they have owned it
for less than two years.
Maximum exclusion applies only if the sale is by reason of:
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 Change in place of employment
(50 miles)
 Health of certain qualified individuals
 Unforeseen circumstances (death, divorce, multiple births from same pregnancy,
unemployment or change in employment, etc.)
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American Jobs Creation Act-2004
“Recognition of gain from the sale of a principle
residence acquired in a like-kind exchange within 5
years of sale. (10) PROPERTY ACQUIRED IN LIKE-KIND
EXCHANGE -- If a taxpayer acquired property in an
exchange to which
section 1031 applied, subsection
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(a) shall not apply to the sale or exchange of such
property if it occurs during the 5-year period
beginning with the date of the acquisition of such
property.”
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Revenue Procedure 2005-14
 Take advantage of §121 (tax exclusion on a primary residence) and §1031 (tax
deferred exchange treatment) when a property was a primary residence for 2 of
the last 5 years, but most recently held for investment purposes.
 Allows both capital gain tax exclusion – and deferral – which benefits
homeowners with gain over the
$500,000 and $250,000 limits.
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Feedback question 04.
In order for an exchange to qualify for 100% tax deferral, the taxpayer must?
A
Purchase greater square footage
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B
Payoff all debt
C
Reinvest all net exchange proceeds
D
Use a real estate broker
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Feedback question 04.
In order for an exchange to qualify for 100% tax deferral, the taxpayer must?
A
Purchase greater square footage
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B
Payoff all debt
C
Reinvest all net exchange proceeds
D
Use a real estate broker
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The Exchange Equation
For full tax deferral, an Taxpayer must meet two requirements:
1.
2.
Reinvest all net exchange proceeds
Acquire property with the same or greater debt.
Value
Relinquished
Replacement
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$900,000
$1,200,000
- Debt
$300,000
- Cost of Sale
$60,000
Net Equity
$540,000
Boot
$660,000
$0
$540,000
$0
The Taxpayer acquired property of greater value, reinvesting all net equity
and increasing the debt on the replacement property.
Analysis: There is no boot.
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The Exchange Equation
Relinquished
Replacement
Value
$900,000
$700,000
- Debt
$300,000
$260,000
- Cost of Sale
$60,000
Net Equity
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$540,000
$440,000
Total Boot
Boot
$40,000
$ 100,000
$140,000
The Taxpayer acquired property of a lower value, keeps $100,000 of the net equity
and acquired a replacement property with $40,000 less debt.
Analysis: This results in a total of $140,000 in boot.
($40,000 mortgage boot and $100,000 in cash boot = $140,000)
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The Exchange Equation
Relinquished
Replacement
Value
$900,000
$800,000
- Debt
$300,000
$260,000
- Cost of Sale
$60,000
Boot
$40,000
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Net Equity
$540,000
$540,000
Total Boot
$0
$40,000
The Taxpayer acquired property of a lower value, reinvesting all net equity, but
has less debt on the replacement property.
Analysis: This results in $40,000 in mortgage boot.
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§1031 Exchange - Formats & Variations
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§1031 Exchange
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§1031 Exchange - Formats & Variations
The Two-Party
Trade (Swap)
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§1031 Exchange
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§1031 Exchange - Formats & Variations
The Two-Party
Trade (Swap)
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§1031 Exchange
The Three-Party
Exchange (Alderson
Format)
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§1031 Exchange - Formats & Variations
The Two-Party
Trade (Swap)
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§1031 Exchange
The Delayed
Exchange with a QI
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The Three-Party
Exchange (Alderson
Format)
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§1031 Exchange - Formats & Variations
The Two-Party
Trade (Swap)
Multiple Sales and
Acquisitions
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§1031 Exchange
The Delayed
Exchange with a QI
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The Three-Party
Exchange (Alderson
Format)
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§1031 Exchange - Formats & Variations
Parking Arrangements
(Reverse and
Improvement)
The Two-Party
Trade (Swap)
Multiple Sales and
Acquisitions
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§1031 Exchange
The Delayed
Exchange with a QI
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The Three-Party
Exchange (Alderson
Format)
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The Two-Party Trade (Swap)
Party A
SINGLE FAMILY HOME
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Party B
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Trade of Deeds
SINGLE FAMILY HOME
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Poll question 05.
A two party trade or sway could be done without a(n)
A
Agreement
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B
Like-kind property
C
Qualified intermediary
D
Deeded interest
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The Three-Party Exchange - Alderson
ALDERSON
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BUYER
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SELLER
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The Three-Party Exchange - Alderson
ALDERSON
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BUYER
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SELLER
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The Three-Party Exchange - Alderson
ALDERSON
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BUYER
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SELLER
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The Three-Party Exchange - Alderson
ALDERSON
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Rep. Prop. Deed
BUYER
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SELLER
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The Three-Party Exchange - Alderson
ALDERSON
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Rep. Prop. Deed
BUYER
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$
SELLER
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Feedback question 06.
Which of the following exchange formats is most widely used today?
A
The delayed exchange
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B
Two-party swap
C
Alderson format
D
Reverse exchange
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Feedback question 06.
Which of the following exchange formats is most widely used today?
A
The delayed exchange
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B
Two-party swap
C
Alderson format
D
Reverse exchange
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The Delayed Exchange with a QI
SALE
TAXPAYER
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BUYER
0 Identification
Period
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45
Total Exchange Period
180
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The Delayed Exchange with a QI
SALE
TAXPAYER
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BUYER
$
0 Identification
Period
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45
QUALIFIED
INTERMEDIARY
Total Exchange Period
180
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The Delayed Exchange with a QI
SALE
PURCHASE
TAXPAYER
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BUYER
$
0 Identification
Period
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45
QUALIFIED
INTERMEDIARY
SELLER
$
Total Exchange Period
180
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Delayed Exchange - Time Requirements
45 Day Identification
Period:
The Taxpayer must
identify potential
replacement
property(s) by
midnight of the
45th day from the
date of sale.
0 Identification
Period
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45
Total Exchange Period
180
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Delayed Exchange - Time Requirements
45 Day Identification
Period:
The Taxpayer must acquire the
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replacement property by midnight
of the 180th day, or the date the
taxpayer must file its tax return
(including extensions) for the year
of the transfer of the relinquished
property, whichever is earlier.
The Taxpayer must
identify potential
replacement
property(s) by
midnight of the
45th day from the
date of sale.
0 Identification
Period
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180 Day Exchange Period:
45
Total Exchange Period
180
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Poll question 07.
The identification period ends on midnight of the ___ calendar day after closing
on the relinquished property.
A
45th
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B
60th
C
135th
D
180th
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Delayed Exchange - Identification Rules
Three Property Rule: The Taxpayer may
identify up to three properties of any fair
market value.
200% Rule: The Taxpayer may identify an
unlimited number of propertieswww.Mckissock.com
provided the
total fair market value of all properties
identified does not exceed 200% of the fair
market value of the relinquished property.
95% Rule: If the Taxpayer identifies
properties in excess of both of the above
rules, then the Taxpayer must acquire 95% of
the value of all properties identified.
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Delayed Exchange - Identification Rules
Identification must be:

Made in writing

Unambiguously describe the property
(street address or legal description)
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
Signed and dated by the Taxpayer

Sent by midnight of the 45th day

Delivered to the Qualified Intermediary or a party
related to the exchange who is not a disqualified
person
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Highlights of a Valid Delayed Exchange
Consult with an experience Qualified Intermediary (QI), and tax/legal advisors prior
to closing on the sale of the relinquished property.
Ensure that the sale contract is assignable and that the buyer is made aware of
such assignment in writing.
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The following language is to establish three things:

Intent to effect a §1031 tax deferred exchange;

Release the Buyer from any liabilities or costs resulting in the exchange;

Notify the Buyer in writing of assignment.
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Highlights of a Valid Delayed Exchange
Sale of the Relinquished Property: “Buyer is aware that Seller is to perform an IRC
§1031 tax deferred exchange. Seller requests Buyer’s cooperation in such an exchange,
and agrees to hold Buyer harmless from any and all claims, liabilities, costs, or delays
in time resulting from such an exchange. Buyer agrees to an assignment of this
contract by the Seller”

The Qualified Intermediary’s Exchange Agreement must be executed prior to
closing the sale. QI overseeswww.Mckissock.com
the closing.

The Taxpayer must identify the property(s) to be acquired in accordance with the
Rules of Identification.

The Taxpayer must close on the new property by the 180th calendar day (or their
tax filing date – whichever is earlier) from the close of the relinquished property
sale.
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§1031 Exchange Documentation
Qualified Intermediary:






Exchange Agreement
Assignment Agreement
Notice of Assignment
Account Set-Up Forms
Security of Funds Instrument
Instruction to closing officer
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§1031 Exchange
Documentation
Closing Entity:




Settlement Forms
FRPTA (state withholding, where applicable)
1099 Form
Other documents common to the area
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The Multiple Property Exchange
SALE
PURCHASE
TAXPAYER
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BUYER 1
BUYER 2
$
QUALIFIED
INTERMEDIARY
SELLER
$
BUYER 3
0 Identification
Period
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45
Total Exchange Period
180
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The Multiple Property Exchange
SALE
PURCHASE
TAXPAYER
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SELLER 1
$
BUYER
$
QUALIFIED
INTERMEDIARY
$
SELLER 2
$
SELLER 3
0 Identification
Period
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45
Total Exchange Period
180
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Feedback question 08.
In both a reverse exchange and improvement exchange what is the name of the
format used to make sure they taxpayer does not own both properties at the
same time?
A
Delayed exchange
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B
Qualified intermediary
C
Conservation easement
D
Parking arrangement
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Feedback question 08.
In both a reverse exchange and improvement exchange what is the name of the
format used to make sure they taxpayer does not own both properties at the
same time?
A
Delayed exchange
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B
Qualified intermediary
C
Conservation easement
D
Parking arrangement
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Parking Arrangements
What is a Reverse Exchange?
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Parking Arrangements
What is a Reverse Exchange?
Purchasing the replacement property
before the sale of the relinquished
property.
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Parking Arrangements
What is an Improvement Exchange?
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Parking Arrangements
What is an Improvement Exchange?
Building a new replacement property
from the ground-up or making
improvements to an existing
replacement property.
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Revenue Procedure 2000-37
Effective September 15, 2000
 Provides a “safe harbor” for reverse exchange transactions that stay within the
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parameters of the Revenue Procedure.
 Reverse exchanges may be structured outside the safe harbor.
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Revenue Procedure 2000-37
Key Terms
QEAA = Qualified Exchange Accommodation Arrangement
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EAT = Exchange Accommodation Titleholder
(EAT cannot be a disqualified person and must be subject to federal income tax.)
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QEAA Summary
EAT must acquire legal title to the property or other indicia of ownership to be
treated as beneficial ownership of the property under applicable principles of
commercial law (e.g., a contract for deed).
Intent – It is the Taxpayer’s bonawww.Mckissock.com
fide intent that the property held by the exchange
accommodation title holder represent either replacement property or relinquished
property in an exchange.
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QEAA Summary
 Qualified Exchange Accommodation Agreement
 No later that five business days after the EAT’s acquisition of the replacement
property, the Taxpayer and the EAT enter into QEAA.
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 Identification of relinquished property within 45 calendar days in the manner
consistent with the requirements of §1-1031(k)-1(c).
 180 calendar days maximum parking term by EAT.
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Permissible Agreements
 EAT may act as both QI and EAT.
 Taxpayer may guarantee debt or obligations and can indemnify the EAT from
construction expenses.
 Taxpayer may loan or advance funds for acquisition.
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 EAT can lease or enter into management agreements with Taxpayer.
 Taxpayer can act as supervisor and/or contractor to provide means for
improvements on parked property.
 EAT and Taxpayer may enter agreements, puts and calls and fixed or formula prices.
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Reverse Exchange Format
Replacement Property Parked (Step 1)
TAXPAYER
EAT Acquisition
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QUALIFIED
INTERMEDIARY
180
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Total Exchange Period
SELLER
45
Identification 0
Period
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Reverse Exchange Format
Replacement Property Parked (Step 1)
TAXPAYER
EAT Acquisition
$
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QUALIFIED
INTERMEDIARY
180
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Total Exchange Period
SELLER
45
Identification 0
Period
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Reverse Exchange Format
Replacement Property Parked (Step 1)
TAXPAYER
EAT Acquisition
$
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QUALIFIED
INTERMEDIARY
180
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Total Exchange Period
SELLER
$
45
Identification 0
Period
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Reverse Exchange Format
Replacement Property Parked (Step 1)
TAXPAYER
EAT Acquisition
$
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QUALIFIED
INTERMEDIARY
180
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Total Exchange Period
Rep.
Prop.
Deed
SELLER
$
45
Identification 0
Period
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Reverse Exchange Format
Replacement Property Parked (Step 1)
TAXPAYER
EAT Acquisition
$
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Lease
QUALIFIED
INTERMEDIARY
180
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Total Exchange Period
Rep.
Prop.
Deed
SELLER
$
45
Identification 0
Period
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Reverse Exchange Format
Replacement Property Parked (Step 2)
TAXPAYER
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BUYER
180
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EAT
Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Replacement Property Parked (Step 2)
TAXPAYER
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BUYER
180
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EAT
Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Replacement Property Parked (Step 2)
TAXPAYER
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BUYER
EAT
$
180
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Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Replacement Property Parked (Step 2)
TAXPAYER
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$
BUYER
EAT
$
180
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Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Replacement Property Parked (Step 2)
TAXPAYER
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$
Rep. Prop. Deed
BUYER
EAT
$
180
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Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Positives
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 Exchange Equity Need Not Be
Present
 Allows For Multiple Relinquished
Properties
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1-800-328-2008
Reverse Exchange Format
Positives
Negatives
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 Exchange Equity Need Not Be
Present
 Allows For Multiple Relinquished
Properties
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 Lender May Have Issues
Lending To EAT
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Reverse Exchange Format
Relinquished Property Parked (Step 1)
TAXPAYER
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EAT
180
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Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked (Step 1)
TAXPAYER
Rel. Prop. Deed
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EAT
180
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Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked (Step 1)
TAXPAYER
Rel. Prop. Deed
Lease
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EAT
180
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Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked (Step 1)
TAXPAYER
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SELLER
EAT
180
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Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked (Step 1)
TAXPAYER
$
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SELLER
EAT
180
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Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked (Step 1)
TAXPAYER
$
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EAT
180
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Total Exchange Period
$
SELLER
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked (Step 1)
TAXPAYER
$
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EAT
180
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Total Exchange Period
$
SELLER
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked (Step 2)
TAXPAYER
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BUYER
180
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EAT
Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked (Step 2)
TAXPAYER
Rel.
Prop.
Deed
BUYER
180
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EAT
Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked (Step 2)
TAXPAYER
Rel.
Prop.
Deed
BUYER
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EAT
$
180
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Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked (Step 2)
TAXPAYER
Rel.
Prop.
Deed
BUYER
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$
EAT
$
180
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Total Exchange Period
45
Identification 0
Period
1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked
Positives
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 Loan and purchase easier (direct
loan to Taxpayer)
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1-800-328-2008
Reverse Exchange Format
Relinquished Property Parked
Positives
Negatives
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 Loan and purchase easier (direct
loan to Taxpayer)
 Equity and debt should match
to avoid boot
 Lender issues (Due on sale &
prepayment penalties)
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1-800-328-2008
Poll question 09.
How long after purchasing a replacement property would a taxpayer have to sell
their relinquished property under a safe harbor reverse exchange?
A
Undefined
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B
Maximum of 180 days
C
Maximum of 360 days
D
Maximum of 45 days
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1-800-328-2008
The Improvement Exchange
Why Perform an Improvement Exchange?
 The property to be acquired in the exchange is not of equal or greater value
to property being sold.
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 Build a new investment from ground-up.
 The new investment is of equal or greater value but it needs refurbishments.
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1-800-328-2008
The Improvement Exchange
Step 1
TAXPAYER
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BUYER
0 Identification
Period
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EAT
45
Total Exchange Period
SELLER
180
1-800-328-2008
The Improvement Exchange
Step 1
TAXPAYER
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BUYER
0 Identification
Period
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EAT
45
Total Exchange Period
SELLER
180
1-800-328-2008
The Improvement Exchange
Step 1
TAXPAYER
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BUYER
EAT
SELLER
$
0 Identification
Period
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45
Total Exchange Period
180
1-800-328-2008
The Improvement Exchange
Step 1
TAXPAYER
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BUYER
$
0 Identification
Period
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SELLER
EAT
45
$
Total Exchange Period
180
1-800-328-2008
The Improvement Exchange
Step 1
TAXPAYER
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BUYER
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SELLER
EAT
$
0 Identification
Period
Rep.
Prop
Deed
45
$
Total Exchange Period
180
1-800-328-2008
The Improvement Exchange
Step 1
TAXPAYER
Construction
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Agreement
BUYER
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SELLER
EAT
$
0 Identification
Period
Rep.
Prop
Deed
45
$
Total Exchange Period
180
1-800-328-2008
The Improvement Exchange
Step 2
TAXPAYER
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EAT
0 Identification
Period
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45
Total Exchange Period
180
1-800-328-2008
Important Issues in Improvement Exchange
Identification of Replacement Property to be Produced
“…if a legal description is provided for the underlying land
and as much detail is provided regarding construction of
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the improvements as is practicable
at the time
identification is made.”
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1-800-328-2008
Important Issues in Improvement Exchange
Receipt of Replacement Property to be Produced
“…if not within the provisions of Section 1031(a) if the
relinquished property is transferred in exchange for services
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(including production services).
Thus, any additional
production occurring with respect to the replacement
property after the property is received by the taxpayer will
not be treated as the receipt of property of like-kind.”
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1-800-328-2008
Why Exchange? Sale vs. an Exchange
1ST CALCULATE NET ADJUSTED BASIS
Original Purchase Price (Basis)
plus Capital Improvement
minus Depreciation
equals Net Adjusted Basis
$500,000
$50,000
-$150,000
$400,000
2nd CALCULATE CAPITAL GAIN*
Sales Price
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minus Net Adjusted Basis
$1,200,000
-$400,000
minus Cost of Sale
-$80,000
equals CAPITAL GAIN
$720,000
3rd CALCULATE CAPITAL GAIN TAX DUE
Recaptured Depreciation (25%)
$37,500
plus Federal Capital Gain (15%)
$85,500
plus State Tax (CA 9.3%)
$66,960
TOTAL TAX DUE
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$189,960
1-800-328-2008
Why Exchange? Sale vs. an Exchange
4th CALCULATE AFTER-TAX EQUITY
Sales Price
minus Cost of Sale
$1,200,000
-$80,000
minus Loan Balances
-$300,000
equals GROSS EQUITY
$820,000
minus Capital Gain Taxes Due
$189,960
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equals AFTER-TAX
EQUITY
$630,040
5th ANALYZE REINVESTMENT - SALE
After-Tax Equity x 4
$2,520,160
6th ANALYZE REINVESTMENT – EXCHANGE
Gross Equity = Net Equity
Gross Equity x 4
$820,000
$3,280,000
Note: 25% x $150,00 = $ 37,500 * 15% x $570,000 = $85,500 * 9.3% x 720,000 = $66,960
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1-800-328-2008
Choosing a “Qualified Intermediary”
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1-800-328-2008
Choosing a “Qualified Intermediary”
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1-800-328-2008
Feedback question 10.
The Qualified Intermediaries fees on reverse and improvement exchanges are?
A
Less than a delayed exchange
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B
Typically more than a delayed exchange
C
About the same as delayed exchanges
D
About the same as a simultaneous exchange
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1-800-328-2008
Feedback question 10.
The Qualified Intermediaries fees on reverse and improvement exchanges are?
A
Less than a delayed exchange
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B
Typically more than a delayed exchange
C
About the same as delayed exchanges
D
About the same as a simultaneous exchange
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1-800-328-2008
QUESTIONS?
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Content provided by Asset Preservation
800-282-1031 Apiexchange.com or info@apiexchange.com
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1-800-328-2008
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customer!
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We hope you enjoyed the course, and
if you have any questions, please don’t
hesitate to call us at
1-800-328-2008
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1-800-328-2008