TEE-Shots Newsletter

If the buyer of your property wants you to carry financing on the sale, the owner carry note will be taxable in a 1031 exchange unless you read this article first.

's called "seller financing," "owner carry" or "contract for deed." Your buyer puts up some cash, but needs you to make up the difference. If you're doing a 1031 exchange, you need to know your options. Otherwise, you might end up holding the tax bill.

Section 1031 says you have to hold both your old and new properties with an investment intent, but it doesn't define what investment intent is. We, like most 1031 advisors, use the year-and-a-day holding period as a benchmark for defining investment intent. But there are many investors who are willing to risk a shorter holding period.

The IRS will attack these shorter holding periods, and they almost always win. But if you would like to read about taxpayers who won an eight-month holding period case, visit 1031Articles.com for the full story.

"Boot" is what the IRS calls the taxable part of a 1031 exchange. If you have boot, whether because you bought down, or you took cash out of an exchange, you will very likely pay tax twice, unless you keep a record of the fact that you've already paid the tax.

As we start to wind down towards the end of the year, now is a good time to point out that 1031 exchanges are a great vehicle to use in shifting gain between two tax years.

Because section 1031 law is vague when it comes to exchanging with a related party, some investors have been tempted to fudge the rules. But why risk it? There is some leeway that allows you to complete this kind of transaction without stepping into danger.

If you thought your property was protected because it’s in an LLC, think again. A recent Florida Supreme Court ruling substantially weakens the protection offered by single member LLCs--even those located outside of Florida.

If you, your friends or clients hold property in LLCs, this newest article is a must-read:

New Court Case Weakens LLC Protections
A recent Florida Supreme Court decision has potentially weakened the protection offered real estate investors by Limited Liability Companies (or "LLCs")....

The 1031 Experts
866-694-0204

One of the basic rules for holding title to property in a 1031 exchange is: “how you hold title to your old property is how you have to take title to your new property.”

In the past several years there have been several instances where Colorado 1031 intermediaries either failed or were unable to return the funds they held for their clients.

This had a double-catastrophic impact on the victims because not only did they lose their funds, but they also owed tax on the sale. The IRS has just released a ruling that will help with some of their pain--they can now spread the gain over any cash they recover from the theft.

A common question we get this time of year involves what happens when a 1031 exchange falls in two tax years.

For example, you sell your old property in 2009, but your exchange fails and you get your money back in 2010 - when is your exchange taxable: 2009 or 2010?

The answer is, whichever year you WANT it to be.