Tuesday, December 1, 2009

Is there a 1031 Exchange in Your Future?

That is a question that I have heard an awful lot lately. Why 1031 exchanges and why now? I would like to share a few thoughts with you on this topic. As many of you know Section 1031 of the IRS tax code contains provisions which allows deferral of taxable gains when the proper conditions are met under the code. I am by no means a tax attorney or an accountant but in layman terms what it amounts to in its simplest form is a tax deferred event when you sell real property, provided that you purchase another property of equal or greater value and you do it according to the rules set forth by IRS to qualify for the deferral. The implications of this are staggering and can mean the difference of thousands of dollars in taxes and possibly millions in equity when even a little planning is done in order to qualify for this aspect of the tax code. Let me be the first to say that this kind of thing is highly technical and the details of any given transaction should properly be reviewed by your tax advisor, your attorney and the other professionals who make it their business to protect your interest and guide you in such matters. Having said that the 1031 rules are something that you may want to learn more about. I see this aspect of the tax code becoming more and more important in the future. For instance, if I were to ask your opinion of the direction of capital gains taxes in the future what would you say? Do you think they will go down? Stay the same? If you are like me you might believe that they have a very good chance of going up. Even if the legislators do nothing the sunset provisions under existing law will take affect within the months ahead and capital gains tax will automatically revert to 20%. I happen to think that there is pressure to drive it higher than that depending on the economy and political climate next year. All the more reason to learn how to use the provisions of Sec. 1031 of the revenue code. I had the privilege of sponsoring a series of webinars for my clients recently hosted by Bill Exeter of EXETER 1031. He did an amazing job of explaining many aspects of the code that allows for tax deferral on all types of transactions not normally thought of as qualifying transactions. If you would like more information about the opportunities provided under this provision of the tax code give me a call I will be happy to make a personal introduction to Bill Exeter, a consummate expert in his field and a man I admire as a true professional.

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