March 2008 Archives

In the last weeks, we have focused on 1031 tax deferred exchanges. Named after the IRS tax code that permits such transactions, 1031 exchanges allow investors to defer paying taxes on property they buy and sell as long as the transactions occur within a 180 day time span and the funds are placed with an exchange facilitator or accommodator. Ultimately, whether I am hosting the radio show or conducting Prime Time Investing workshops for RealSource, I cannot stress enough the importance of working with a ‘qualified’ qualified intermediary, or QI. While knowledge, experience and a certain level of coverage or fidelity coverage is significant, the financial backing of the company, strict adherence to financial reporting and disclosure requirements hold even more importance.

A few general guidelines to follow in order for a taxpayer to defer all the taxable gain:

• The value of the replacement property must be equal to or greater than the value of the relinquished property.
• The equity in the replacement property must be equal to or greater than the equity in the relinquished property.
• The debt on the replacement property must be equal to or greater than the debt on the relinquished property.
• All of the net proceeds from the sale of the relinquished property must be used to acquire the replacement property.         

Click here for a list of Qualified Intermediaries who have appeared on Income Property Investment Talk, here to talk with a real estate investment advisor, or here if you have any question you’d like answered as it applies to income property investments.