1031 TAX EXCHANGE 101

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					      1031 TAX EXCHANGE 101
            Myrtle Beach, South Carolina




                    GREYSTONE




                     G
                     S
              REAL ESTATE GROUP, LLC




2423 Highway 17 South • North Myrtle Beach, SC 29582
              Toll Free: 1-866-396-1031
      Phone: 843-272-1030 • Fax: 843-272-1347
WELCOME TO GREYSTONE

 Creating Assets From Liabilities




             GREYSTONE




              G
              S
       REAL ESTATE GROUP, LLC




   Greystone Real Estate Group, LLC
           Office: 843.272.1030
         Toll Free: 866.396.1031
            Fax: 843.272.1347
   Email: service@GreyStoneReg.com
               Table of Contents




What is a 1031 Tax Exchange?          ........................................... 1

Tax Exchange Rules      ..................................................... 2 - 3

Rules and Timelines     .......................................................... 4

Tenants-in-Common 101          .............................................. 5 - 6

Contact Greystone REG, LLC            ........................................... 7

Calculating Capital Gain Examples            ............................. 8 - 10

Calculating Capital Gain Worksheets             ........................ 11 - 12

Glossary of Terms     .................................................... 13 - 15
      WHAT IS A 1031 EXCHANGE?

                                     A 1031 Exchange, otherwis known as
                                       a tax deferred exchange, is a simple
                                      strategy and method for selling one
                                      property, that’s qualified, and then
                                          proceeding with an acquisition of
                                        another qualified property within a
                                    specific time frame. The logistics and
                                   process of selling a property and then
                                     buying another property are practically
 identical to any standardized sale; a “1031 Exchange” is unique be-
 cause the entire transaction is treated as an “exchange” and not just as
 a simple sale. It is this difference between “exchanging” and not simply
buying and selling which, in the end, allows the taxpayer(s) to qualify for
a deferred gain treatment. So to say it in simple terms, sales are taxable
               with the IRS and 1031 exchanges are not.


 Due to the fact that exchanging, a property, represents an IRS-recog-
 nized approach to the deferral of capital gain taxes, it is very impor-
tant for you to understand the components involved and the actual intent
 underlying such a tax deferred transaction. It is within the Section 1031
 of the Internal Revenue Code that we can find the appropriate tax code
  necessary for a successful exchange. We would like to point out that
      within the Like-Kind Exchange Regulations, issued by the US
Department of the Treasury, we find the specific interpretation of the IRS
                      and the generally transaction.



                                    GREYSTONE




      GREYSTONE REG, LLC             G
                                     S                  1031 TAX EXCHANGE 101

                               REAL ESTATE GROUP, LLC
    1031 TAX EXCHANGE RULES

        TWO MAJOR RULES TO FOLLOW:




1    The total purchase price of the replacement “like kind”
     property must be equal to, or greater than the total net sales
     price of the relinquished, real estate, property.




2       All the equity received from the sale, of the relinquished
        real estate property, must be used to acquire the re-
        placement, “like kind” property.




 The extent that either of the rules (above) is violated will determine
  the tax liability accrued to the person executing the Exchange. In
  any case which the replacement property purchase price is less,
 there will be a tax responsibility incurred. To the extent that not all
 equity is moved from the relinquished to the replacement property,
there will be tax. This is not to say that the (1031) exchange will not
   qualify for these reasons. Keep in mind, partial exchanges do in
fact, qualify for a partial tax-deferral treatment. This simply means
   that the amount, of the difference (if any), will be taxed as a
             boot or “non-like-kind” real estate property.

                                   GREYSTONE




    GREYSTONE REG, LLC              G
                                    S                  1031 TAX EXCHANGE 101

                              REAL ESTATE GROUP, LLC
       THE 1031 EXCHANGE RULE

    • A property transaction can only qualify for a deferred tax
 exchange if it follows the 1031 Exchange Rule laid down in the
            US tax code and the treasury regulations.


 • The foundation of 1031 Exchange Rule by the IRS is that the
  properties involved in the transaction must be “Like Kind” and
    both properties must be held for a productive purpose in
               business or trade, as an investment.


  • The 1031 Exchange Rule also lays down a guideline for the
proceeds of the sale. The proceeds from the sale must go through
 the hands of a “Qualified Intermediary” (QI) and not through your
hands or the hands of one of your agents or else all the proceeds
will become taxable. The entire cash or monetary proceeds from
the original sale have to be rein vested towards acquiring the new
 real estate property. Any cash proceeds retained from the sale
                             are taxable.


   • The second fundamental rule is that the 1031 Exchange
  requires that the replacement property must be subject to an
equal or greater level of debt than the property sold or as a result
the buyer will be forced to pay the tax on the amount of decrease.
  If not he/she will have to put in additional cash to offset the low
            debt amount on the newly acquired property.




                                   GREYSTONE




      GREYSTONE REG, LLC            G
                                    S                  1031 TAX EXCHANGE 101

                              REAL ESTATE GROUP, LLC
           RULES AND TIMELINES

There are two timelines that an individual completing a (TIC) or a
1031 property exchange should abide by and know.



The Identification Period
This is the crucial period during which the party selling a property
must identify other replacement properties that he proposes or
wishes to buy. It is not uncomon to select more than one property.
This period is scheduled as exactly 45 (forty-five) days from the
day of selling the relinquished property. This 45 (forty-five) days
timeline must be followed under any and all circumstances and is
not extendable in any way, even if the 45th (forty-fifth) day falls
on a Saturday, Sunday or legal US holiday.



The Exchange Period
This is the period within which a person who has sold the
relinquished property must receive the replacement property. It is
referred to as the Exchange Period under 1031 exchange (IRS)
rule. This period ends at exactly 180 days after the date on which
the person transfers the property relinquished or the due date for
the person’s tax return for the taxable year in which the transfer
of the relinquished property has occurred, whichever situation is
earlier. Now according to the 1031 exchange (IRS) rule, the 180
day timeline has to be adhered to under all circumstances and is
not extendable in any situation, even if the 180th day falls on a
Saturday, Sunday or legal US holiday.
                                  GREYSTONE




      GREYSTONE REG, LLC           G
                                   S                  1031 TAX EXCHANGE 101

                             REAL ESTATE GROUP, LLC
         TENANTS-IN-COMMON 101

Simply, a Tenant In Common (TIC) is a property owned by two or more
persons at the same time. The TIC investors have an undivided interests
in the property or designated interests of differing sizes.


As TICs you share the tax benefits, income and appreciation of the
property on pro rata basis, but that is depending on your particular share
of the property.


    Other Benefits Include:


• Larger Investments
Institutional grade properties like warehouses, shopping centers,
industrial property, etc… that cost a few million dollars or more.


• DIversIfy your reaL estate
Investing in much larger properties, along with the smaller properties.
This would be highly effective in increasing the value and security
of your real estate investments. This in turn, can help you diversify
across different types and sizes of real estate investments as well as
geographic markets.


• Increase cash fLow
Increase your potential cash flow, and provide you with tax write-offs and
property appreciation benefits. This is accomplished without the time
commitment of active property management that would otherwise be
required, if you were the sole owner of the property.

                                     GREYSTONE




       GREYSTONE REG, LLC             G
                                      S                  1031 TAX EXCHANGE 101

                                REAL ESTATE GROUP, LLC
         TENANTS-IN-COMMON 101

• fIxeD rates fInancIng for tIc owners
Some of the biggest real estate companies in the USA source invest-
ment properties and garner a fixed rate, non-recourse financing with
institutional terms for TIC owners.


• access to seLectIve natIonaL reaL estate companIes
Gain access easily to carefully selected, national real estate companies,
who seek the investment properties for you.


• excLusIve anD DILIgent Investment servIces
As a real estate company, the lender and the security company conducts
extensive due diligence on the investment properties offered to Tenants
in Common. The time and resources necessary are usually provided in a
scale far greater than most individual investors are capable of.


• a team of professIonaLs aLways here to heLp
TIC investment properties employ a professional
property and asset management
team. Enjoy the benefits of real
estate ownership, without the day-
to-day property management
headaches.




                                     GREYSTONE




       GREYSTONE REG, LLC             G
                                      S                  1031 TAX EXCHANGE 101

                                REAL ESTATE GROUP, LLC
 CONTACT GREYSTONE REG, LLC

At Greystone Real Estate Group, LLC our goal is to preserve
wealth, defer taxes (per IRS guidelines) and provide an income
stream for our clients.


We typically pay our investors a high rate of return on their initial
investment, which is paid every month. Our costs associated with
the transaction, called “load”, and is substantially lower than our
competition.


To date we have closed more than $250 million dollars in 1031
Tax Exchanges and TIC deals and have been business for 35
years.


Our knowledgeable teams of experts include attorneys, CPAs,
real estate brokers and qualified intermediaries (QI). To
schedule a confidential meeting either via in person, conference
call or the internet please contact us at:


Greystone Real Estate Group, LLC
Office: 843.272.1030
Toll Free: 866.396.1031
Fax: 843.272.1347
Email: service@GreyStoneReg.com




                                   GREYSTONE




         GREYSTONE REG, LLC         G
                                    S                  1031 TAX EXCHANGE 101

                              REAL ESTATE GROUP, LLC
     CALCULATING CAPITAL GAIN

The gain, not the profit or equity, from the sale of your business,
trade or investment property is subject to the combination of
Federal and State Capital Gain Taxes and Federal Taxes on the
gain due to the depreciation taken on the property.

You can defer all Feral Capital Gain Tax simply by performing an
exchange with Greystone Real Estate Group, LLC for a
replacement property of equal of higher value than the property
you formerly held, and by acquiring debt to or exceeding the debt
you previously held. If the debt on your property is low, or you
gain is large, even a partial deferral may work out well for you!


Greystone Real Estate Group, LLC recommends that investors
considering a tax deferred exchange should seek the advice of
their accountant or attorney for professional legal advice.




                                   GREYSTONE




       GREYSTONE REG, LLC           G
                                    S                  1031 TAX EXCHANGE 101

                              REAL ESTATE GROUP, LLC
       CALCULATING CAPITAL GAIN

       CALCULATING CAPITAL GAIN TAXES DUE IF YOU SELL
                AND DO NOT DO AN EXCHANGE


EXAMPLE:

STEP 1:                        Calculate Net Adjusted Basis
          $100,000             Original Purchase Price
   +      $ 1,000              Improvements (Non Expensed)
   -      $ 10,000             Depreciation Taken
          $ 91,000             Equals Net Adjusted Basis

STEP 2:                        Calculate Capital Gain
          $200,000             Sales Prices (FMV)
          $ 91,000             Net Adjusted Basis
          $ 13,000             Cost of Sale (commissions,fees, etc)
          $ 96,000             Equals Realized Capital Gain
                               (Line 19 of Form 8824)

STEP 3:                      Calculate Capital Gain Tax Due
          $   2,500          *Recaptured Depreciation (25%)
                              X Depreciation used above
   +      $ 12,900           *Federal Capital Gain Tax (15%)
                              X Your Realized Capital Gain
                  7%          Your State Capital Gain Tax Rate
                              (Estimated Rate)
   +      $ 1,920           **State Capital Gain Tax
          $ 17,320            Equals Total Taxes Due


*These amounts can be deferred by doing an exchange.
**Some states do not allow a deferral of State Capital Gain Taxes.

                                 GREYSTONE




       GREYSTONE REG, LLC         G
                                  S                  1031 TAX EXCHANGE 101

                            REAL ESTATE GROUP, LLC
      CALCULATING CAPITAL GAIN

        CALCULATING HOW MUCH OF THE CAPITAL GAIN
 REALIzED ON PAGE 9 WILL BECOME RECOGNIzED AND TAXABLE
              (IF ANY) BY DOING AN EXCHANGE
1. Relief of Debt on Relinquished Property ...............                          $ 50,000
2. Less: Debt acquired on Replacement Property ....                                 $ 50,000
3. Equals: Net Relief of Liabilities .............................                  $ - 0 -
   (not less than 0) These three lines determine if there
   is any mortgage boot. If debt acquired is less than debt
   relief, mortgage boot results. Answer may not be less
   than zero because excess mortgage can not offset
   cash boot, but excess cash paid can offset mortgage
   boot.(the term “boot” means taxable gain)
4. Plus: Cash Received ...............................................              $150,000
   Note: FMV of Relinquished Property (from STEP 2)
   less debt relief (Line 1) less FMV of other property
   received including value of owner held Notes (Line
   10) should equal cash received.
5. Less: Cash paid .......................................................          $134,250
   Note: Cash paid is normally the difference between
   a Replacement Property contract price and loan amount.
6. Less: Cost of Sale Expenses .................................                    $ 13,000
   (from STEP 2, page 2)
7. Less: Exchange Expense and Closing Fee of
   Replacement Property ............................................                $    2,750
8. Less: fmv of “other property” relinquished
   “other property” is non-like property ...................                        $    - 0 -
   (very few exchanges include “other property”
9. Equals Total Boot Received (not less than zero)                                  $    - 0 -
10. plus: fmv of “other property”, cash & notes
     Received ..................................................................    $    - 0 -
* Owner financing can create problems in an exchange, if                           *$    - 0 -
unavoidable, call Greystone.
                                             GREYSTONE




        GREYSTONE REG, LLC                    G
                                              S                  1031 TAX EXCHANGE 101

                                        REAL ESTATE GROUP, LLC
       CALCULATING CAPITAL GAIN

CALCULATING YOUR CAPITAL GAIN TAXES DUE IF YOU SELL AND
               DO NOT DO AN EXCHANGE


WORKSHEET:

STEP 1:                         Calculate Net Adjustment Basis
          $   ______            Original Purchase Price
   +      $   ______            Improvements (Non Expensed)
   -      $   ______            Depreciation Taken
          $   ______            Equals Net Adjusted Basis

STEP 2:                         Calculate Capital Gain
          $   ______            Sales Prices (FMV)
          $   ______            Net Adjusted Basis
          $   ______            Cost of Sale (commissions,fees, etc)
          $   ______            Equals Realized Capital Gain
                                (Line 19 of Form 8824)

STEP 3:                       Calculate Capital Gain Tax Due
          $ ______           *Recaptured Depreciation (25%)
                              X Depreciation used above
   +      $ ______           *Federal Capital Gain Tax (15%)
                              X Your Realized Capital Gain
                              Your State Capital Gain Tax Rate
                              (Estimated Rate)
   +      $ ______          **State Capital Gain Tax
          $ ______            Equals Total Taxes Due


*These amounts can be deferred by doing an exchange.
**Some states do not allow a deferral of State Capital Gain Taxes.

                                 GREYSTONE




       GREYSTONE REG, LLC         G
                                  S                  1031 TAX EXCHANGE 101

                            REAL ESTATE GROUP, LLC
       CALCULATING CAPITAL GAIN

  CALCULATING HOW MUCH OF THE CAPITAL GAIN REALIzED ON
       PAGE 9 WILL BECOME RECOGNIzED AND TAXABLE
              (IF ANY) BY DOING AN EXCHANGE
1. Relief of Debt on Relinquished Property ............... $                             ______
2. Less: Debt acquired on Replacement Property .... $                                    ______
3. Equals: Net Relief of Liabilities ............................. $                     ______
   (not less than 0) These three lines determine if there
   is any mortgage boot. If debt acquired is less than debt
   relief, mortgage boot results. Answer may not be less
   than zero because excess mortgage can not offset
   cash boot, but excess cash paid can offset mortgage
   boot.(the term “boot” means taxable gain)
4. Plus: Cash Received ............................................... $                 ______
   Note: FMV of Relinquished Property (from STEP 2)
   less debt relief (Line 1) less FMV of other property
   received including value of owner held Notes (Line
   10) should equal cash received.
5. Less: Cash paid ....................................................... $             ______
   Note: Cash paid is normally the difference between
   a Replacement Property contract price and loan amount.
6. Less: Cost of Sale Expenses ................................. $                       ______
   (from STEP 2, page 2)
7. Less: Exchange Expense and Closing Fee of
   Replacement Property ............................................ $                   ______
8. Less: fmv of “other property” relinquished
   “other property” is non-like property ................... $                           ______
   (very few exchanges include “other property”
9. Equals Total Boot Received (not less than zero)                               $       ______
10. plus: fmv of “other property”, cash & notes
     Received .................................................................. $       ______
* Owner financing can create problems in an exchange, if *$                              ______
unavoidable, call Greystone.
                                             GREYSTONE




         GREYSTONE REG, LLC                   G
                                              S                  1031 TAX EXCHANGE 101

                                        REAL ESTATE GROUP, LLC
                                   GREYSTONE




1031 TAX EXCHANGE                     G
                                      S
                                                      GLOSSARY TERMS


                             REAL ESTATE GROUP, LLC
A                                       B
Actual Receipt                          Basis
When the Exchangor actually             The starting point for determin-
receives the funds from the sale        ing gain or loss in any transac-
of the Relinquished Property.           tion. In general, basis is the
Receipt of cash by the Exchangor        cost of the property.
before he receives the Replace-
ment Property may be enough to          Boot
destroy the tax-deferred treat-         Real estate property or pro-
ment of the transaction.                ceeds that the taxpayer re-
                                        ceives in the 1031 exchange
Adjusted Basis                          that does not qualify as “like-
The purchase price, plus capital        kind” property. Boot is subject
improvements, less depreciation. to taxes.
Transactions involving exchanges,
gifts, probates and trust distribu-     C
tions may impact the property’s         Capital Gain
adjusted basis.                         Capital gain is calculated as
                                        follows: total selling price of
Agreement for Transfer                  the Relinquished Property,
Purchase agreement, sale                less exchange expenses, less
agreement, earnest money                the Relinquished Property’s
agreement, offer and accep-             basis. The adjusted basis is
tance, real estate contract or          the original cost, plus the cost
other contract contemplating the        of capital improvements, less
purchase or sale of real property.      depreciation or cost recovery
                                        deductions.


                          1031 TAX EXCHANGE 101
                                  GREYSTONE




1031 TAX EXCHANGE                 G
                                  S
                                                   GLOSSARY TERMS


                          REAL ESTATE GROUP, LLC
Constructive Receipt                   Exchange Period
A critical issue in the Delayed        The 180-day window or the
Exchange. If the Exchangor             due date of the Exchangor’s
has control over the exchange          tax return, whichever comes
proceeds or property during the        first, in which the Exchangor
exchange period, he may be             has to complete a tax-deferred
deemed in constructive receipt.        exchange. During the exchange
If the Exchangor actually or           period there is a 45-day iden-
constructively receives the ex-        tification period in which the
change proceeds or property, the Exchangor must identify which
exchange may not qualify under         property or properties will be
IRC Section 1031.                      purchased.


D                                      Exchangor
Delayed Exchange                       Another name for the property
A 1031 exchange where the              owner wishing to sell one
purchase of the Replacement            property and buy another “like-
Property can take place up to          kind” Replacement Property
180 days from the sale of the          and defer capital gain taxes on
Relinquished Property. Also            the proceeds.
called a Starker Exchange.


E
Exchange Funds Account
The account established by the
Qualified Intermediary to hold
the exchange funds.


                        1031 TAX EXCHANGE 101
                                GREYSTONE




1031 TAX EXCHANGE                   G
                                    S
                                                    GLOSSARY TERMS


                           REAL ESTATE GROUP, LLC
I                                     R
Identification Period                 Realized Gain
The time period that begins upon Refers to gain that is not yet
the transfer of the Relinquished      taxed. In a successful exchange
Property. During the 45-day period,   the gain is realized but not
the Exchangor must identify the       recognized and therefore not
Replacement Property in order         taxed.
to continue with the Section
1031 exchange transaction.            Relinquished Property
                                      The original property being
L                                     sold by the taxpayer when
Like-Kind Property                    making an exchange.
The Replacement Property in a
1031 exchange that is similar in      Replacement Property
classification or characteristics     The new property being
to the Relinquished Property.         acquired by the taxpayer when
Like-kind property cannot be a        making an exchange.
primary residence or a second
home and must be held for busi-       Reverse Exchange
ness or investment purposes.          A 1031 exchange where the
                                      Replacement Property is
Q                                     bought first and the sale of the
Qualified Intermediary                Relinquished Property occurs
The third party that helps facili- afterward.
tate a 1031 exchange transaction
is also called the Accommodator
or QI.


                        1031 TAX EXCHANGE 101
                                 GREYSTONE




1031 TAX EXCHANGE                 G
                                  S
                                                     GLOSSARY TERMS


                            REAL ESTATE GROUP, LLC
S                                      Transfer Tax
Safe Harbor                            A tax assessed by a city,
Specifications used to protect         county or state on the transfer
the property seller’s money and        of property that may be based
the QI in a 1031 exchange.             on equity or value. The use of
Parameters suggested by the IRS        direct deeding in an exchange
which when followed will result in     avoids additional transfer tax.
drastically reduced scrutiny.


T
Tax-Deferred Exchange
A transaction that allows one to
reinvest the proceeds from the
sale of any property held for
investment or business purposes
(Relinquished Property) to another
like property (Replacement
Property) and defers capital gain
taxes that would otherwise be
due on the first sale. Also called
a 1031 exchange, Starker Ex-
change, like-kind exchange and
Delayed Exchange.




                         1031 TAX EXCHANGE 101
                    GREYSTONE




                     G
                     S
              REAL ESTATE GROUP, LLC




2423 Highway 17 South • North Myrtle Beach, SC 29582
              Toll Free: 1-866-396-1031
      Phone: 843-272-1030 • Fax: 843-272-1347