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I'll Help You Find Your Perfect
Home!
If
you are an investor please see the "1031 Tax Deferred
Exchange" information below.
As a Buyer, You Can Expect:
Exclusive Buyer Representation at no cost to you. When you
hire us to represent you in the purchase of your home, our fiduciary
responsibility is to solely represent your best interests, not the sellers,
while maintaining fair and honest real estate practice for everyone in the
transaction. We will always place your best interests above those of any other
party to the transaction. including our own.
An
easygoing personality, one of calm reassurance. We will take however much
time you need to make your buying decision. We are not interested in the local
practice of "Slamming" buyer sales just to move on to the next sale.
We
will always do our very best to protect your interests from beginning to
end.
We
will search tirelessly until we have found the home that meets your
needs.
We
can assist you in finding a mortgage company with very competitive rates
and lowest costs currently available, home inspectors, title and escrow
companies, home warranty and insurance companies that will provide the services
you expect and deserve.
20
years of knowledge, experience and specific training in negotiating on
behalf of our clients. We understand how saving on the purchase price and
obtaining the lowest possible mortgage rates can make you thousands of dollars
when it comes time to sell.
Focused attention to the multitude of details involved in a
successful closing on your home, including but not limited to:
Complete follow through with the terms and conditions of your
offer, including inspections, appraisals, mortgage qualification, state
required disclosure information, home owners association details, preliminary
title and escrow instructions, closing documents and figures, and any special
requirements.
Thorough review of escrow instructions and correction of errors as
necessary.
We
will be with you for your final walk through inspection to assure the home
is being provided to you as stated in the agreement.
We
will be with you at the signing of your escrow, mortgage and closing
documents, in the event you have questions or concerns.
We
will deliver the keys to you immediately upon the recordation of the court
documents.
Our goal is
to provide you with the quality professional service that will insure our
long-term relationship and your referral business from friends, family,
neighbors and co-workers.
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The Tax Deferred Exchange
The
tax deferred exchange offers real estate investors one of the last great
investment opportunities to build wealth and save taxes. By completing an
exchange, the investor (Exchanger) can dispose of their investment property,
use all of the equity to acquire replacement investment property, defer the
capital gain tax that would ordinarily be paid, and leverage all of their
equity into the replacement property. Two requirements must be met to defer the
capital gain tax: 1) the Exchanger must acquire "like kind" replacement
property and 2) the Exchanger cannot receive cash or other benefits (unless the
Exchanger pays capital gain taxes on this money).
In
any exchange the Exchanger must enter into the exchange transaction prior to
close of the relinquished property. The Exchanger and the Qualified
Intermediary (QI) enter into an Exchange Agreement, which essentially requires
that 1) the Qualified Intermediary acquires the relinquished property from the
Exchanger and transfers it to the buyer by a direct deed from the Exchanger and
2) the QI acquires the replacement property form the seller and transfers it to
the Exchanger by a direct deed from the seller. The cash or other proceeds from
the relinquished property are assigned to the QI and are held by the QI in a
separate, secure account. The exchange funds are used by the QI to purchase the
replacement property for the Exchanger.
Important Considerations for an Exchange
Exchanges must be completed within strict time limits with
absolutely no extensions. The Exchanger has 45 days from the date the
relinquished property closes to "Identify" potential replacement properties.
This involves a written notification to the Qualified Intermediary listing the
addresses or legal descriptions of the potential replacement properties. The
purchase of the replacement property must be completed within 180 days after
the close of the relinquished property. After the 45 days has passed, the
Exchanger may not change their Property Identification list and must purchase
one of the listed replacement properties or the exchange fails!
To
avoid the payment of capital gain taxes the Exchanger should follow three
general rules: a) purchase a replacement property that is the same or
greater value as the relinquished property, b) reinvest all of the exchange
equity into the replacement property and c) obtain the same or greater debt on
the replacement property as on the relinquished property. The Exchanger can
offset the amount of debt obtained on the replacement property by putting the
equivalent amount of additional cash into the exchange.
In
the case of real property exchanges, the Exchanger must sell property that
is held for income or investment purposes and acquire replacement property that
will be held for income and investment purposes. This is the "like kind"
property test.
IRC section 1031 does not apply to exchanges of stock in trade, inventory,
property held for sale, stocks, bonds, notes, securities, evidences of
indebtedness, certificates of trust, or beneficial interests or interests in a
partnership.
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Non-Tax Reasons to Exchange
Generally, investor's complete tax-deferred exchanges to defer the
capital gains tax on the disposition of their investment properties,
however, there are many additional underlying reasons an investor might want to
exchange one property for another. The motives often fall along standard
risk-reward or cash flow appreciation scales. These are some of the typical
non-tax motives to exchange:
Exchange from fully depreciated property to a higher value property
that can be depreciated.
Exchange from property which cannot be refinanced,
such as vacant land, to improved property, which will support a new loan,
thereby giving the client the ability to obtain cash after the acquisition of
the replacement property.
Exchange from non-income producing raw land to
improved property to create a cash flow from the rental income.
Exchange
from a property with maximized or minimal cash flow, such as an apartment
building, to a higher cash flow property, such as a retail shopping center, to
generate a large cash flow.
Exchange from a stagnant or slowly appreciating
property to a property in an area with faster appreciation.
Exchange for a
property or properties that may be easier to sell in the coming years.
Exchange to meet the client's location requirements, for example, the
client moves to another state and wants to have their investment property
nearby.
Exchange to fit the lifestyle of a client, for example a retiree
may exchange for a property requiring reduced management responsibility so they
can do more traveling.
Exchange from several smaller properties to one
larger property to consolidate the benefits of ownership and reduce management
responsibilities.
Exchange from a larger property to several small
properties to divide an estate among several children or for retirement
reasons.
Exchange to a property the client can use in their own profession,
for example a doctor may exchange from a rental house to a medical building to
use for their practice.
Exchange from a partial interest in one property to
a full interest in another property.
Exchange from a management intensive
fee interest in real estate to a triple net leased property where the lease,
including options, has 30 or more years remaining.
The Role of the Qualified Intermediary
The
use of a Qualified Intermediary (QI) is essential to completing an
IRC 1031 Tax Deferred Exchange. The QI performs several vital functions in an
exchange.
Acts as a Principal
The
IRS stipulates that a reciprocal trade or actual exchange must take place in
each 1031 transaction. This means the Exchanger must assign to a QI a)
their interest as seller of the relinquished property and b) their interest as
buyer of the replacement property. By becoming an actual party to the exchange,
a reciprocal trade takes place even when there are three or more parties
involved in an exchange transaction. Ex: when the Exchanger is purchasing the
replacement property from someone other than the buyer of his or her
relinquished property.
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Holds Exchange Proceeds
If
the Exchanger actually or constructively receives any of the proceeds from the
sale of their relinquished property, those proceeds will be taxable as
boot. The QI will hold the proceeds from the sale in a separate exchange
account until the funds are used to purchase the replacement property. All
exchange proceeds held by the QI should be covered by a fidelity bond insurance
coverage policy.
Prepares Legal Documentation
Several legal documents are necessary in order to properly
complete an exchange. The QI will prepare an Exchange Agreement, Assignment
Agreements, and the Exchange closing instructions for each closer.
Provide Quality Service
Although the process on a 1031 exchange is relatively simple,
the rules are complicated and filled with potential pitfalls. With many gray
areas surrounding IRS codes and legal issues in an exchange, it's crucial that
the QI work closely with all parties involved to ensure a smooth transaction.
How to Initiate an Exchange
Find a Qualified Intermediary to assist you with the exchange
as early in the process as possible. Look for a QI that is knowledgeable and
experienced and of especially critical importance: the safety of your funds
while held by the QI. At a minimum, you should require a QI to provide
insurance bond coverage.
Instruct your real estate agent to include and "Exchange
Cooperation Clause" as an addendum to the purchase and sale agreement on
the relinquished property. An example might be: "Buyer hereby acknowledges that
it is the intent of the Seller to effect an IRC 1031 tax deferred exchange
which will not delay the closing or cause additional expense to the Buyer. The
Seller's rights under this agreement may be assigned to a Qualified
Intermediary, for the purpose of completing such an exchange. Buyer agrees to
cooperate with the Seller and the QI in a manner necessary to complete the
exchange."
Contact your QI as soon as possible after escrow is opened or
after entering into the purchase and sale agreement and advise them well in
advance of closing.
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Tax Deferred Exchange Terminology
Boot Fair Market Value of non-qualified (not "like kind)
property received in an exchange.
Constructive Receipt A term
referring to the control of proceeds by an Exchanger even though funds may not
be directly in their possession.
Exchanger The property owner
seeking to defer capital gain tax by utilizing a 1031 exchange. (The IRS Code
uses the term "Taxpayer")
Like-Kind Property This term refers to the
nature or character of the property, not its grade or quality. Generally, real
property is "like-kind" as to all other real property as long as the
Exchanger's intent is to hold the properties as investment for productive use
in a trade or business. With regards to personal property, the definition of
"like-kind" is much more restrictive.
Qualified Intermediary The
entity that facilitates the exchange for the Exchanger. Although the Treasury
Regulations use the term "Qualified Intermediary," some companies use the term
"Facilitator" or "Accommodator."
Relinquished Property The property
"sold" by the Exchanger. This is also sometimes referred to as the "exchange"
property or the "downleg" property.
Replacement Property The
property acquired by the Exchanger. This is sometimes referred to as the
'acquisition" or "upleg" property.
Identification Period The period
during which the Exchanger must identify Replacement Property in the exchange.
The Identification Period starts on the day the Exchanger transfers the first
Relinquished Property and ends at midnight on the 45th day thereafter.
Exchange Period The period during which the Exchanger must acquire
Replacement Property in the exchange. The Exchange Period starts on the date
the Exchanger transfers the first Relinquished Property and ends on the earlier
of the 180th day thereafter or the due date (including extensions) of the
Exchanger's tax return for the year of the transfer of the Relinquished
Property.
Like-Kind Property
To
qualify for a tax deferred exchange treatment under the 1031 tax code, the
relinquished property must be exchanged for replacement property that is of
"like- kind". The term "like-kind" refers to the nature or character of the
property and not to its grade or quality. It does not matter whether the real
property involved is improved or unimproved since that fact only relates to the
grade or quality of the property and not to its kind or class. In essence, all
real property is "like-kind" with all other real property. To qualify for an
exchange the Exchanger must have held the relinquished property for investment,
or for "productive use in their trade or business," and must intend to do the
same with the replacement property.
The
following are examples of "like-kind" properties:
Residential for commercial
Bare land for rental property
Fee
simple interest for 30-year leasehold
Single family rental for multi-family
rental
Non-income producing raw land for income producing rental property
Rental mountain cabin for a dental office in which the Exchanger intends to
practice
Corporate twin-engine aircraft for a corporate jet
Mitigation
credits for restoring wetlands for other mitigation credits
Buses for buses
Garbage routes for garbage routes
Livestock of the same sex
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1031 Do's and Don't
DO
advanced planning for the exchange. Talk to your accountant, attorney,
broker, lender and Qualified Intermediary.
DO
keep in mind these three basic rules to qualify for complete tax
deferral:
- Use
all proceeds from the relinquished property for purchasing the replacement
property.
- Make sure the debt on the replacement property is equal to or greater
than the debt on the relinquished property. (Exception: A reduction in debt can
be offset with additional cash; however, a reduction in equity cannot be offset
by increasing debt.)
- Receive only "like-kind" replacement property.
DO
attempt to sell before you purchase. Occasionally Exchanges find the ideal
replacement property before a buyer is found for the relinquished property. If
this situation occurs, a "reverse" exchange (buying before selling) may be
necessary. Exchangers should be aware that "reverse" exchanges are considered a
more aggressive exchange variation because no clear IRS guidelines exist.
DO
NOT miss your identification and exchange deadlines. Failure to identify
within the 45-day identification period or failure to acquire replacement
property within the 180-day exchange period will disqualify the entire
exchange.
DO
NOT plan to sell and invest the proceeds in property you already own. Funds
applied toward property already owned purchase "goods and services," not
"like-kind" property.
DO
NOT dissolve partnerships or change the manner of holding title during the
exchange. A change in the Exchanger's legal relationship with the property
may jeopardize the exchange.
For
professional advice on Tax Deferred Exchanges in Las Vegas, Nevada, contact one
of the following:
- IPX 1031 Investment Property Exchange Services, Inc.
Robert
Noggle, Esq.
500 N. Rainbow Road # 100
Las Vegas, Nevada 89107
Email: rnoggle@fnf.com
W-
702-822-8132
F- 702-870-7117
C- 702-592-1938
Web site:
http://www.ipx1031.com
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| REAL ESTATE TRIVIA |
| Q |
Which metropolitan area in America currently offers the most affordable market in which to buy new homes?
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| A |
The housing market in Youngstown, Warren and Boardman, Ohio is currently the most affordable metro area in the U.S. |
| More Real Estate Trivia |
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