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Exchanger Beware: Biden's Proposed Tax Plan Implodes 1031 Exchanges .. and more!
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Submitted by The Experts Team on Fri, 08/28/2020 - 20:31
The Tax Plan proposed by Democratic presidential candidate Joe Biden would eliminate 1031 exchanges for investors who have ordinary annual income of $400,000 or more. If one assumes this $400,000 cap includes the gain from the actual sale of real property, in addition to a taxpayer's ordinary income earned, the lion's share of real estate investment property sales would not qualify for 1031 exchange tax treatment. Even if this assumption‑‑that all earned income would not be combined with the 1031 exchange property gain‑‑the bulk of most real estate sales would likely exceed the $400,000 gain amount.
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TEE-Shot: Exchanger Beware: Biden’s Tax Plan Implodes 1031 Exchanges
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Submitted by The Experts Team on Wed, 08/26/2020 - 19:31
The Tax Plan proposed by Democratic Presidential Candidate Joe Biden eliminates 1031 Exchanges for investors with an annual net income of $400,000 or more. If one assumes that the $400,000 cap includes gain from the sale of real estate, most investment property sales would not qualify for 1031 exchange tax treatment.
Along with the proposed increase of the personal income tax rate, as well as the long-term capital gain tax rate, selling an investment property would become a highly taxable situation. The long-term effect on the real estate investment market could be extremely negative.
In light of this proposed tax plan, is it time to get your real estate holdings in order? Contact the 1031 Exchange Experts for questions, or to discuss 1031 exchange strategies, at 303-694-0204 or [email protected].
A qualified exchange consultant is ready to assist.
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1031 Exchanges and Partnership Challenges
Submitted by Mary Lou Schwab on Tue, 07/14/2020 - 07:18
Partnerships holding real estate investments face major challenges when some partners want to do a 1031 exchange while others want to cash out at the sale. But there are a number of options that can allow all the partners to get what they want. Timing and planning are required to meet both the IRS partnership and 1031 exchange rules. Here are just a few of those strategies:
1. The Drop and Swap Method. Real estate investment partnerships can be distributed to the partners as a separate “tenancy in common interest,” and the partnership entity is dissolved. Property is then held for at least a year prior to the sale and each tenant in common owner can either cash out or participate in individual 1031 exchanges. There are stringent IRS tenant in common ownership requirements that must be met per Revenue Proc 2002-22, including annual management agreements.
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SOLD! Tax Strategies for Selling Vacation Property
Submitted by Mary Lou Schwab on Fri, 06/05/2020 - 13:53
Due to economic factors or life changes, investors who have held vacation rental property for many years can face significant tax liabilities when they sell it. Federal long term capital gain tax rates can be anywhere from 15 to 20%. The unearned income tax rate is 3.8%, and a depreciation recapture at 25% could be incurred. Additionally, state tax rates will also apply. Adding it all up, a potential tax liability upwards of around 39% can come as a rude surprise for most investors.
So what other options do investors have to limit or defer their tax liability? One option is to convert the use of the property into your primary residence. Another is to do a 1031 Exchange.
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§1031 & Corona Virus Update
Submitted by The Experts Team on Fri, 04/10/2020 - 14:32
Happy Good Friday 1031 Clients and Friends! I hope this email finds you well.
Good news: the IRS has granted extensions for 1031 Investors who have like-kind exchange deadlines between April 1, 2020 and July 15, 2020. The IRS issued new guidance on April 9, 2020 that granted all taxpayers, including “trusts, estates, corporations and other non-corporate tax filers” a filing extension until July 15. Notice 2020-23: https://www.irs.gov/pub/irs-drop/n-20-23.pdf is an update to Notice 2020-18. The new Notice 2020-23 doesn't address like-kind exchanges specifically, but tax experts agreed they are covered under the broadening of the extension. This give investors with a 45-Day identification deadline or a 180-Day Exchange Purchase deadline between April 1, 2020 and July 15, 2020 an automatic extension to July 15, 2020.
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Allowable and Unallowable 1031 Exchange Closing Costs
Submitted by Mary Lou Schwab on Mon, 04/06/2020 - 16:00
There are always issues with closing costs associated with 1031 exchanges. All exchangers want to have their closing costs paid with 1031 proceeds without creating a taxable event. Some closing costs paid by exchange proceeds are allowable by the I.R.S., while others are taxable. The I.R.S. Revenue Ruling 72-456 specifies, for example, that if exchange funds are used to pay a broker’s commissions, it does not ruin a 1031 exchange.
Here’s a list of specific exchange expenses that are allowed by most tax advisors:
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Working Through the Crisis
Submitted by The Experts Team on Wed, 04/01/2020 - 11:05 • Updated on Fri, 04/10/2020 - 14:33
Working Through the Crisis
We must face a harsh fact: it’s a scary time.
We’ve recently fielded lots of calls with concerns about the economic situation caused by this worldwide pandemic. We hear them, and we feel them.
Fear is normal in times like these, and to be realistic, the unexpected is still ahead. That can be paralyzing. But we should take heart: EVERY challenge America has ever faced was unexpected, unwritten, and unique to world history. And we have overcome.
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How to Rescue a Multiple-Property Exchange
Submitted by Mary Lou Schwab on Fri, 08/02/2019 - 11:54
Sometimes an investor exchanging multiple Old Properties into a single New one can have timing issues if one of the sales falls through. For example: say an investor begins the 1031 exchange process by selling two Old Properties, but one of the sales falls through due to an inspection or mortgage loan issue. If this failure happens right before the New Property purchase date, it can cause major dilemmas.
But there’s a solution! To gain an extra 180 days to complete the sale of the Old Property you can set up a Reverse Exchange within a simple deferred exchange transaction, thus saving your exchange!
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Dealer-Developer Issues Can Jeopardize Your 1031 Exchange
Submitted by Mary Lou Schwab on Mon, 07/01/2019 - 01:00
If you do a number of 1031 exchanges every year, you should be aware of the Dealer/Developer issues. To qualify for a 1031 exchange, a taxpayer must be able to prove their “intent” at the time of purchase was to hold the property for investment.
According to the I.R.S., real estate held as “stock in trade or other property primarily for sale” is excluded from the tax benefits of Section 1031. Listed here are some factors the IRS uses to determine if there was intent to hold property for investment:
• Length of Ownership The nature and purpose for buying the property.
• Consistent with Investment Activity Has the tax-payer’s investment income and expenses on tax returns been consistent with investment activity? (It’s a good idea to NOT file a Schedule C for the 1031 property, or classify it as “inventory” or “held for development.”)
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1031 EXCHANGES vs. Qualified Opportunity Zone Investments
Submitted by Gary Gorman on Mon, 06/10/2019 - 15:36
The Tax Reform Act of 2017 created “Qualified Opportunity Zones” to promote investments in low income communities across the United States. The Qualified Opportunity Fund, or, “QOF,” was created to give investors capital gains tax reduction or elimination to encourage economic growth in specific areas. There are two similarities between QOFs and 1031 Exchanges: 1. they’re both tax-gain deferral strategies (and sometimes even tax elimination!), and 2. the investments must be made within 180 days from the sale of the Old Property. There’s where the similarities end. If a taxpayer decides to invest in a QOF after starting a 1031 Exchange with a Qualified Intermediary, the access to the 1031 proceeds is limited until one of two things happen: 1. If no replacement 1031 property is identified by the investor by the forty-fifth day of the exchange, the funds can be released on the forty-sixth day of the exchange. OR 2.
NEW DELHI (AP) — India’s confirmed coronavirus toll crossed 7 million on Sunday with a number of new cases dipping in recent weeks, even as health experts warn of mask and distancing fatigue setting in.
The Health Ministry registered another 74,383 infections in the past 24 hours. India is expected to become the pandemic’s worst-hit country in coming weeks, surpassing the U.S., where more than 7.7 million infections have been reported.
The ministry also reported 918 additional deaths, taking total fatalities to 108,334.
The number of people who have died of COVID-19 has remained relatively low in South and Southeast Asia — from India to Vietnam and Taiwan — compared to European countries and the United States, said Dr. Randeep Guleria, a government health expert.
“We have been able to keep the curve rise slow, but I do agree that we have not been able to get it to move aggressively down. That’s related to our population density, diversity of our country and socioeconomic challenges in our country,” said Guleria, referring to India’s burgeoning population of nearly 1.4 billion.
Some experts say though that India’s death toll may not be reliable because of poor reporting and health infrastructure and inadequate testing.
India aims to provide vaccines to 250 million people by July 2021, Health Minister Harsh Vardhan said last week. He said that the government was planning to receive 450 million to 500 million vaccine doses and would ensure “equitable access”.
India saw a steep rise in cases in July and added more than 2 million in August and another 3 million in September. But it is seeing a slower pace of coronavirus spread since mid-September, when the daily infections touched a record high of 97,894.
It’s averaging more than 70,000 cases daily so far this month. India has a high recovery rate of 85% with active cases below 1 million, according to the Health Ministry.
Health officials have warned about the potential for the virus to spread during the upcoming religious festival season, which is marked by huge gatherings in temples and shopping districts.
A crucial factor will be people wearing masks and maintaining a safe distance.
Dr. S.P. Kalantri, a hospital director in the village of Sevagram in India’s worst-hit western Maharashtra state, said that people in his village had stopped wearing masks, maintaining distance or washing their hands regularly. He added that the sick were still being brought in to his hospital. Microsoft word 2019 16 24 frame.
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India’s meager health resources are poorly divided across the country. Nearly 600 million Indians live in rural areas, and with the virus hitting India’s vast hinterlands, experts worry that hospitals could be overwhelmed.
“If we are able to have good behavior in terms of physical distancing and masks, maybe by early next year we should be able to come to a new normal. COVID-19 will not finish but it will be under reasonable control with travel and other things becoming much more easier and people relatively safer,” said Guleria.
Retired virologist Dr. T. Jacob John said there was increasing tendency among Indians not to wear masks or maintain distancing.
Archive Expert 5 03 09
Social media have compounded the problem by propagating misinformation and fake cures. “And the result of this is that people have gotten fed up and have started making their own conclusions,” John said.
Nationwide, India is testing more than 1 million samples per day, exceeding the World Health Organization’s benchmark of 140 tests per 1 million people. But many of these are antigen tests, which look for virus proteins and are faster but less accurate than RT-PCR, which confirm the coronavirus by its genetic code.
With the economy contracting by a record 23.9% in the April-June quarter, leaving millions jobless, the Indian government is continuing to relax lockdown restrictions that were imposed in late March. The government in May announced a $266 billion stimulus package, but consumer demand and manufacturing are yet to recover.
A large number of offices, shops, businesses, liquor stores, bars and restaurants have reopened. Restricted domestic and international evacuation flights are being operated along with train services.
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AP Science Writer Aniruddha Ghosal contributed to this report.