There have been a number of failed 1031 Exchange Qualified Intermediaries over the last couple of years.  The majority of these were precipitated by the sever market conditions that we are experiencing, although some have been from misappropriation of clients' 1031 Exchange funds.  There are significant tax reporting challenges involved when an investor sells relinquished property and structures a 1031 Exchange in order to defer his or her taxes by acquiring a like-kind replacement property and then having the Qualified Intermediary fail. 

Revenue Procedure 2010-14 was issued today by the Internal Revenue Service to help investors that were affected by 1031 Exchange Qualified Intermediaries that failed to complete the investor's Like Kind Exchange by acquiring and transferring replacement property to the investor.

The Rev. Proc. 2010-14 provides a safe harbor method of treating and reporting capital gain or loss for certain taxpayers who initiate tax deferred exchanges under Section 1031 of the Internal Revenue Code but fail (default) to complete their 1031 Exchange because their Qualified Intermediary has failed to acquire and transfer like kind replacement property to the investor.

The Internal Revenue Service will not treat investors that meet the requirements of Rev. Proc. 2010-14 as being in actual or constructive receipt of their 1031 Exchange funds when the investor did not complete his or her 1031 Exchange because of their Qualified Intermediary (QI) defaults and becomes subject to a bankruptcy or receivership proceeding.

        

Assets of any type can qualify, whether real estate or personal property, for 1031 Tax Deferred Exchange treatment if the assets have been held for rental (income production), held for investment (capital appreciation) or used in a trade or business.  Assets that were merely acquired and then held for sale or immediately listed for sale (inventory) will generally not qualify for tax deferred exchange treatment.  The key issue is whether the investor’s intent was to hold or sell the assets.

        

1031 Tax Deferred Exchanges allow investors to sell appreciated assets and defer the payment of their capital gain taxes by acquiring replacement assets.  Investors can therefore keep 100% of their profits working for themselves instead of paying about one-third (1/3) of their profits to the government via income taxes. There are very specific laws, regulations and guidelines that investors must follow to qualify for 1031 Tax Deferred Exchange treatment.

        

We have rolled out a brand new webinar in The Exeter Edge Webinar Series™.  This webinar is designed to help real estate owners and investors protect themselves when they are going through an insurance claim.  The real estate owner needs someone representing their interests when dealing with the insurance company/underwriter.

Hire Your Own Insurance Adjuster: Don't Leave Settlement Money on the Table

Learn what to do in case of a property claim and how to protect yourself from your own insurance company during settlement negotiations.  Speed your financial recovery after an insured property loss by retaining a Public Insurance Adjuster. 

You can register for this free webinar at http://www.exeter1031.com/public_insurance_adjuster_webinar.aspx

        

I'm sitting here listening to our speakers today at our sixth (6th) Wealth & Legacy Seminar ("Just Show Me The Money") since we founded The Center for Wealth & Legacy Studies.  What a great program today.  And, it is quite possibly our best program to date thanks to our co-founder R.J. Kelly and his hard work in finding and recruiting today's speakers and programs. 

We've had speakers on various financing options for small, closely held businesses, including ESOP Plans, Angel Financing (venture capital or "VC" financing), Factoring (accounts receivable financing), SBA financing, Merchant Bankcard financing (credit card financing), and much, much more. 

        

Too Much Of Anything is NOT Necessarily A Good Thing

Real estate investors, especially investors buying California real estate, often focus on the potential for growth in value or appreciation.  But, potential appreciation is really the icing on the cake.  The real key to long-term success and survival when investing in real estate is cash flow.

Positive cash flow from a real estate portfolio allows the investor to continue to pay the bills, cover expenses, service the debt, and receive profits from his or her investment property portfolio, etc., even during difficult economic times.  Positive cash flow keeps you in business. 

Starting a real estate portfolio off with a negative cash flow does not give the investor any breathing room when the market goes bad and tenants begin to move out and gross rental revenue begins to drop, but expenses remain constant.

        

Welcome to the Exeter Real Estate Blog™.   The real estate team at Exeter Exchange Management Corporation looks forward to sharing ideas, successes, strategies as well as failures to help you make better informed real estate decisions.  We will be adding other contributors over time, and your participation in the Exeter Real Estate Discussion Board is always welcome.