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Join Us for a New Webinar about 1031 Exchanges

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You’re Invited – New Webinar: Learn Why the Future of 1031 Exchanges are Managed

Join us for our newest webinar and get educated on 1031 Exchanges to make better real estate investment decisions.

TOPIC: The Future of 1031 Exchanges: Top Concerns to be Aware Of (such as: timing, tax impact, cash flow, estate planning, passive vs. active, replacement asset availability, etc.).

This exclusive webinar will dive deep on the following:

  1. Traditional retail assets: (active management, local buildings) VS. Institutional thesis (diversification across asset classes, ideal geographies, etc.)
  2. Real Estate / Real Property asset classes: Land Banking, Infrastructure Development, Single Family Housing (SFH), Multifamily Housing (MFH) apartment communities, Hospitality (Hotels, etc.)
  3. Addressing Each Concern: timing/tax/exchange execution
  4. Examples and Scenarios of 1031 Exchanges

To reserve your seat, please register here:

https://www.eventbrite.com/e/future-1031-exchanges-are-managed-tickets-417189163017

THIS EXCLUSIVE WEBINAR IS LIMITED TO THE FIRST 500 INVESTORS WHO REGISTER.

About Our Educator: Joel M. Desilets is the President of the Damascus Partners family office. The Desilets family supports causes through The Desilets Philanthropies Fund. Giving is done as a family activity that reflects the diverse philanthropic interests of Desilets family members.

A highly disciplined business leader and Real Estate expert with over 20 years of experience investing and managing throughout the U.S. as a General Partner (GP) in over 6,000 Multifamily apartment units, he has expertise in private wealth encompassing land banking and infrastructure development, single-family home building, investment in venture capital, hedge funds, and multi-strategy private equity, hotels, and other hospitality developments.

For up-to-the minute updates, be sure to follow us on social media:

Did Biden’s Tax Proposal End Up Affecting 1031 Exchanges?

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Image from Pixabay

By Clinton Lu, TFS Properties

Earlier this spring, Biden proposed a number of tax law changes in regards to his Build Back Better program. Aimed at freeing up more money for the little guy, the program divided itself into various parts, one of which was the American Rescue Plan. Within this plan, Biden proposed to do away with the benefits received by performing a 1031 exchange, also known as a “like-kind” exchange, but was this portion of his proposal signed into law?

Section 1031 Like-Kind Exchanges

The IRS Code is divided into sections, one of which details the tax break individuals can take advantage of when it comes to the capital gains taxed on real estate. This particular section, allows investors to roll their profits from a real estate sale into the purchase of another property of the same, or like, type. In doing so, investors defer the capital gains tax that they would typically incur, and are able to reinvest all of the money from their sold property (downleg) into different investment property or properties (upleg.)

Possible Effects of Biden’s Tax Proposal

While it might sound like a good idea on paper, increasing taxes on real estate profits has serious consequences. “The White house emphasizes that its tax increases would affect only the top 1% to 2% of individual taxpayers,” but doing away with 1031 Exchanges would seriously impact both big AND small investors alike.

Image from Pixabay

Both big and small investors can benefit from performing a 1031 Exchange and according to the Congressional Joint Committee on Taxation, investors could save over $40 billion in taxes in the next three to four years if it were to remain in place. That’s money that could—and in many cases, will—be reinvested into other real estate properties and further drive the economy.

This cycle within the real estate industry was so important that the Mortgage Bankers Association and the National Association of Realtors appealed the proposal to halt the exchange. As a result, it seems their efforts, as well as the voices of many others, prevailed.

The Final Verdict

Many feared that ending Section 1031 exchange benefits would have a profound effect on the real estate market. However, this particular part of Biden’s tax proposal was not signed into law. Investors can still defer their taxes on capital gains through a 1031 Exchange and preserve their capital while doing so.

Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.

Constructive Receipt: A Hidden 1031 Exchange Danger

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By Dr. Robert G. Hetsler, Jr.

When done correctly, a #1031 exchange can be a fairly straightforward process. However, there is often one area that catches potential exchangers off guard. The concept of constructive receipt often torpedoes the tax deferred nature of an exchange, and subjects the exchanger to immediate capital gains taxes.

So what is constructive receipt and how is it different than actual receipt? Actual receipt is easy to identify – the exchanger directly receives the sale proceeds from the relinquished property. It also doesn’t matter what form the funds take – cash or wire transfer into an account. The bottom line is if the exchanger has direct access to the funds at any time, the transaction no longer qualifies as a 1031 exchange.

But constructive receipt is slightly more elusive. Constructive receipt occurs when the exchanger has the right to receive or control funds, even if he or she does not have direct access to the funds. As an example, if an exchanger receives the proceeds in the form of a check, then he or she is deemed to have constructive receipt even if they never cash the check.

The mere act of accepting the check, made payable to the exchanger (even with no intention of cashing it themselves), cancels the exchange before it really begins. Even if the exchanger plans to immediately endorse the check over to the qualified intermediary.

Because of the concept of constructive receipt, it is critical that any investor planning to conduct a 1031 exchange brings a qualified intermediary on board before the relinquished property is sold. This eliminates the possibility of constructive receipt.

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If a 1031 exchange is in your future, visit our website to learn more about these powerful tax deferral tools and our qualified intermediary and replacement property locator services.

Key Vocabulary for 1031 Exchanges

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By Dr. Robert G. Hetsler, Jr.

If you’re new to the world of section #1031 of the IRS Tax Code, the terminology that comes along with these tax-saving exchanges can be confusing. To help you understand the phrases you will undoubtedly hear if you choose to complete a tax-deferred 1031 exchange, here’s a list of the key terms you will come across.

Like-Kind: A term that refers to the nature or character of the property being exchanged. In order for the exchange to qualify for tax-deferred status, both the relinquished and replacement property must meet the IRS definition of like-kind.

Boot: This is the fair market value of any non-qualified property you receive during the exchange. It can be cash, loans, property, reduction in debt or even supplies. Basically, anything of value that you receive during the exchange could be considered boot.

Constructive Receipt: Any indirect control you have over the proceeds of the exchange. If you benefit in any way from the proceeds (aside from the purchase of replacement property), this could be considered constructive receipt and can jeopardize the tax-deferred nature of the exchange.

Qualified Intermediary: The individual or entity that manages the exchange and holds sale proceeds for relinquished property (to avoid the exchanger having actual or constructive receipt) and title to the replacement property (again, to avoid receipt issues during the exchange).

Relinquished Property: The old property the exchanger is getting rid of during the exchange.

Replacement Property: The new property the exchanger will acquire during the exchange.

Exchanger: The investor who is conducting the 1031 exchange for his or her own benefit.