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What Makes a Good Exchange? September 2019

What Makes a Good Exchange?

Toija J. Beutler, Attorney

 

A successful exchange requires the input of Good Advisors – tax, legal, financial, real estate, and the exchange company.

There is the perception that an exchange simply requires some paperwork at closing and making sure the investor does not touch the sale proceeds. These are the formalities of an exchange but there is so much more required for a successful outcome.

 

Is there a tax benefit? The primary tax reason for an exchange is deferring the taxes on gain and recapture of depreciation. So, first and foremost, would the Seller be benefited by an exchange? Only their tax advisor knows. They can crunch the numbers and determine if there is enough gain and depreciation deductions to warrant an exchange. There are a multitude of tax reasons why an exchange would not be beneficial. Small gain? Carry forward losses? A recent step up in basis? 

 

Is an exchange in the best interest of the Seller? Only their tax advisor, legal advisor and financial advisor know. They have the history with the Seller to know what is best. Perhaps investment in something more liquid than real estate? 

 

Spotting the opportunity for an exchange? The real estate professional is in the best position to know. They are the first ones on the scene of a potential sale. If the sale is of rental property, commercial property or investment land, 1031 is an option for the Seller and must be explored.

 

The formalities of an exchange? This is what the facilitator/exchange company does. But also…because this is the only work performed by the facilitator…the good ones will roll up their sleeves and work with the Seller and their advisors to make sure that everyone is on the same page. 

 

Complicated exchanges? The whole team. Although 1031 has been in the tax code for 98 years (first enacted in 1921), questions will come up during the course of the exchange for which there are no definitive answers. For most of those years the IRS has been disinterested in 1031 so there are relatively few cases and rulings to guide decision making. It takes the whole team, especially the tax professional and experienced exchange company team, to navigate these gray waters.

 

Upcoming Classes & Events

Links

 

 

1031 What's In/What's Out - 1 hour

Portland Home Realty

Beaverton, OR

September 26, 2019 | 10 am - 12 pm

Contact Kym Wilder for more information:

kwilder@wfgnationaltitle.com

971.998.2903

 

1031 Soup to Nuts - 2 hours

Meadows Conference Room

5300 Meadows Rd.

Lake Oswego, OR 97035

September 27, 2019 | 9 - 11 am

Contact Laura Vandehey to RSVP:

laura@beutlerexchangegroup.com

 

RMLS Trade Show

Salem Convention Center

Salem, OR

October 3, 2019

 

1031 Class - 2 hours

Oregon Association of Tax Consultants

Mid-Willamette

Albany, OR

October 10, 2019 | 6:30 - 8:30 pm

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Contact Toija, Karen, Steffanie, Kelci, or Mark at:

Phone: 503.748.1031  

Toll-free: 844.414.1031

 

 

Kelci Paiva