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Topic 1 - Introduction
This topic introduces real estate exchanges and
focuses on the deferred exchange and how vital the deferred exchange
regulations are in planning and executing real estate exchanges.
Do You Really Want to Make an Exchange?
What is a Like-Kind Exchange
There Must be an Actual Exchange of Properties
Topic 2 - Qualified Property
After recognizing an exchange opportunity, you
must determine if the properties involved in the exchange qualify for
§1031 treatment. I have seen exchangers go to lots of time and trouble
to set up an exchange, only to discover that one or both of the
properties did not even qualify. What a waste of time and money. This
chapter explains how to avoid this common problem. It teaches how to
determine the classification of real estate for §1031 exchange
purposes, which classifications qualify, and which don’t. Like-kind
property as defined in §1031 is explained and detailed. Other topics
include real estate options, foreign real estate, partnerships and
time holding considerations.
The Four Classifications of Real Estate
Mixed Classifications
Excluded Property
Held for Productive Use or Held for Investment
Like-Kind Property
Real Estate Options
Not Held for Resale
Time Holding Considerations
Foreign Real Estate
Partnership Interests
Exchanges of Multiple Properties
Exchanges of Multiple Assets
Topic 3 - Figuring Boot and Taxable Gain
Before your exchange transaction is triggered,
you need to figure how boot and taxable gain (if any) works. This
topic explains how to identify and figure the amount of boot in a
deferred exchange. It deals with boot problems related to mortgage
relief inside the exchange. It also provides special
in-depth coverage of how to treat installment sale notes inside the
exchange period.
Net
Boot Received is Taxable Gain
What Kind of Gain?
Depreciation Recapture
Money and Unlike-Kind Property
Assumption of Liabilities
Figuring Net Mortgage Relief
Mortgage Assumed Less Than Given Up
Mortgage Assumed More Than Given Up
Anticipatory and Post-Exchange Mortgaging
Selling Expenses Paid
Giving Up Unlike-Kind Property
Exchange With Installment Sale Note
Topic 4 - Time Restrictions for Deferred Exchange
Transactions
This topic explains how the identification and
exchange time restrictions work once you have sold your Relinquished
Property. And how to identify the Replacement Property so it qualifies
for §1031 exchange treatment. The rules even permit you to exchange
for property to be constructed to your plans. Great stuff here for tax
planning.
Identification and Exchange Periods
Fraudulently Backdated Documents
Identification - How to Identify
Identification - Property Description
Alternative and Multiple Properties
The 3-Property Rule
The 200 Percent Rule
Incidental Property Disregarded
Revoking the Identification
Receipt of Identified Replacement Property
Replacement Property to be Produced
Topic 5 - Safe Harbors
For Deferred Exchangers
How the safe harbors work is critical to
planning a successful exchange. In general terms, a safe harbor is an
area of protection. The IRS has spelled out certain standards and
procedures for taxpayers to meet in real estate exchanges. As long as
the exchanger meets these criteria, he will be in a “safe harbor” and
not subject to attack by the IRS.
The deferred exchange regulations make explicit
four safe harbors you may use to avoid constructive receipt of money
or boot. If you use safe-harbor specifications, their use will not be
considered in testing to see if you have constructive receipt. That’s
why they are called safe harbors. Since the safe harbor rules require
the exchanger to use the services of a Qualified Intermediary, a wrong
choice can doom your exchange.
The four safe harbors are covered, plus related
party exchanges, and example of direct deeding and how to chose the
right Qualified Intermediary for your transaction.
Safe Harbor #1 - Qualified Intermediaries
Finding the Right Qualified Intermediary
Safe Harbor #2 - Security and Escrow Agreements
Safe Harbor #3 - Qualified Escrow Accounts and Trusts
Cash Proceeds – Questions and Answers
Safe Harbor #4 - Interest and Other Growth Factors
Comprehensive Example of Direct Deeding
Definition of Related Party for Purposes of Deferred Exchanges
Topic 6 -
Reverse Exchanges
Topic
7 - Exchanges Involving Installment Sales
Many exchanges involve both like-kind property
and boot in the form of an installment sale note. This creates a
condition causing both §1031 and §453 (dealing with installment sales)
to apply. Topic Six explains the tax treatment of the installment
note taken in an exchange and how Treasury Decision 8535 coordinates
the safe harbor rules of deferred exchanges with installment sale
rules.
Creation of Installment Note Inside Exchange
Treasury Decision 8535
IRS Illustrations
Topic
8 - Primary Residence in a 1031 Exchange
Even though §1031 focuses on like-kind
exchanges, the exchange transaction interacts with many other code
sections and regulations. Many involve the primary residence. This
topic explains the tax considerations that must be taken into account
when structuring an exchange involving these properties. It explains
how to plan property reclassifications to create great strategies and
ideas.
Personal Residence Primer
Section 121 Exclusion of Gain from Sale of Primary Residence
Special Rules
Tax Planning Strategies for the Primary Residence
Topic
9 - Problem Considerations When Exchanging Vacation Homes
Topic
10 - Figuring Substituted Basis for Replacement
Property
Many people are confused when it comes to
figuring the tax basis of the Replacement Property acquired in a §1031
exchange. This topic takes you step-by-step and teaches how to
figure this basis called substituted basis. Includes figuring basis
when boot is paid and received and allocating basis when more than one
Replacement Property is received
Substituted Basis
Figuring Basis When Boot is Paid
Figuring Basis When Boot is Received
Property Subject to Mortgage
More Than One Property Received
Topic
11 - Special Issues Related to Real Estate Exchangers
Three doctrines must be considered when
structuring an exchange of real estate. One is the Doctrine of
Substance over Form, another is the Doctrine of Step Transactions, and
the third is the Doctrine of Constructive Receipt. While these
doctrines apply to all sections of the Internal Revenue Code, their
application to §1031 exchanges can turn many a “non-taxable exchange”
into a “taxable sale.”
This topic covers those and other pesky
problems that always seem to pop up in an otherwise smooth
transaction. Such as transfers between spouses, vacation homes,
sale-leasebacks and real estate exchanges involving personal property.
Exchanging Multiple Properties
Transfers Between Spouses
Sale-Leasebacks as Exchanges
Using §1031 to Split Up Partners and Investors in Real
Estate
Exchanging Personal Property
Cooperation Clause for Sale of Relinquished Property
Cooperation Clause for Purchase of Replacement Property
Title Considerations
Exceptions
to the 2-Year Rule
Like-Kind Exchanges Between Related Persons
Exceptions to the Related Persons Rule
Doctrine of Substance Over
Form
Doctrine of Step
Transactions
