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Last update: 2009-05-12

Why Do I Have to Assign My Purchase Agreement to My Qualified Intermediary?

2009-05-12 :: Jeffery R. Peterson

Many people ask Why do I have to assign my purchase agreement to my Qualified Intermediary? Even more, they ask Why do I have to give notice that I am assigning my contract to my intermediary to all of the other persons involved in the purchase agreement? It seems intrusive to have to give everyone notice that you are doing and exchange. Why is it anyones business? Old School Requirements Let go back in time before the current Treasury regulations were in place. We would actually deed or transfer our property to the Intermediary. The Intermediary acted as a straw man, so that they became the seller of the relinquished property and the purchaser of the replacement property. So, your Intermediary actually went into title and then participated in the transfer or the purchase of the property.…

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Can I Do a 1031 Exchange on My Contract for Deed Balloon Payoff?

2009-05-05 :: Jeffery R. Peterson

Contract Deeds or Executor Contracts, basically installment sales, create a lot of questions. Here is one that I get a lot. I sold my property ten years ago on an installment sale, a Contract for Deed. And now, I am being paid off, and I am getting this balloon payment from the buyer. Question: Can I do a 1031 Exchange on this windfall of cash that I am receiving? Understand the Timing - When Did the Sale Take Place If you look at this transaction, it may appear that the sale is now occurring because when the balloon payment is given to the vendor, the deed will be delivered to the vendee. So, it feels like perhaps the sale is occurring now. But, for Federal Tax purposes, the sale probably occurred ten years ago when the Contract for Deed or the installment sale was entered into.…

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Can I Purchase my 1031 Exchange Replacement Property on a Contract for Deed?

2009-04-28 :: Jeffery R. Peterson

A lot of people wonder, Can I purchase my replacement property on a Contract for Deed? As financing gets more and more challenging, seller arranged financing looks more appealing. So, if we can find a seller that will convey the property to us on a Contract for Deed, will that property work as a 1031 replacement property? How Can This Work for a 1031 Exchange¦if I do Not have Full Legal Title? The question might be lingering in the back of your mind. Yes, I know that I am the vendee, but I know that the vendor still has legal title. I also know that as a purchaser under a Contract for Deed, I dont receive the actual deed until I am done making my payments. So, query whether this qualifies as a 1031 Exchange....…

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Can I Call My Replacement Property Home Personal Residence and Investment?

2009-04-23 :: Jeffery R. Peterson

Sometimes people want to do a 1031 Exchange into a property that they plan on immediately occupying as their home. And, they wonder to themselves well, I know that I have to treat my replacement property as either business property, property used in my trade, or as investment property. Well, I hope that my personal residence goes up in value, so it must be an investment, right? ...…

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Falsifying or Inflating the Value of your 1031 Replacement Property

2009-04-21 :: Jeffery R. Peterson

When you are doing a 1031 Exchange, you generally want to hit three benchmarks called the napkin test. These are generalities that typically bear out to be good indicators of whether or not all of the gains will be deferred in a 1031 Exchange. Here are the benchmarks. Step One - Equal or Greater Value One, you typically want to buy a replacement property of equal or greater value than the relinquished property that you gave up. So, we want to go up in value, and get a bigger, better property...…

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More Hope for Hope Scholarship Credit

2009-04-16 :: Jeffery R. Peterson

Today’s podcast is highlighting some of the changes that came from the American Recovery and Reinvestment Act of 2009 – otherwise known as the Tax Stimulus Package. In particular, we are going to be talking about Section 25A, which is the Hope Scholarship Credit. Remember, a tax credit is like a negative tax. It offsets dollar for dollar your liability to the government, and it is better than a deduction. Old Section 25A on Steroids Here are some of the enhancements for tax years 2009 and 2010. This has been entitled by the government, The American Opportunity Tax Credit. But, it is really just an enhancement of Section 25A, which is for the Hope Scholarship Credit. Under the old Hope Credit, you were able to take a credit for one hundred per cent of the first $1,200 expended for tuition and related expenses. Then you were able to take a credit for fifty per cent of the next $1,200. So, the maximum credit under the old rule was $1,800...…

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If I Die can I take the Taxes with Me – Part 2

2009-04-09 :: Jeffery R. Peterson

Section 102 of the internal revenue code says that an heir (beneficiary who inherits property) that receives property as a “gift, bequest, devise, or inheritance” takes that property tax-free. It states “Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance”...…

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If I Die can I take the Taxes with Me

2009-04-07 :: Jeffery R. Peterson

Many people ask me questions along the lines of “Over the years, I have invested a large amount of money into an investment property. How does this affect my taxes if I sell the property or if I die?.” First, I would like to talk about the sale vs. 1031 exchange part of the question, and then I would like to go into the ramifications of dying while owning the property...…

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Snake Lying in the Grass – Unexpected Recapture In a 1031 Exchange

2009-03-31 :: Jeffery R. Peterson

Normally in a 1031 exchange, you defer all of your capital gains (both from appreciation in value and depreciation deductions taken over the years) by acquiring a like-kind replacement of equal of more value; and equal of more equity.

In Tax Law – Nobody Wants Surprises

There are some situations when the relinquished property will have some tax complications (snakes in the grass) that could cause you to unexpectedly to recognize gain. To make matters worse, the surprise gains could be characterized as ordinary income and taxed at higher rates than mere capital gains rates...

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Cars and Trucks are Getting More Like-Kind for 1031 Exchanges

2009-03-27 :: Jeffery R. Peterson

Cars and trucks are getting more like-kind. The IRS recently issued a private letter ruling (LTR 200912004) specifically to a tax-payer that was a rental car company that conducted ongoing 1031 like-kind exchange programs. So, every time they disposed of their old rental cars, those were the disposition of “relinquished properties”. Every time they brought in new cars into their rental fleet, those were the “replacement properties”. This was an ongoing cycle, a program of exchanges that had been incorporated into their business model to have the most efficient (tax neutral sale) disposition of their properties. This particular taxpayer had a conundrum, because appreciable personal property such as rental cars are broken into different asset classes...…

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All About 1031 Tax Exchanges - With "Professor 1031"

The "Starker" 1031 Exchange is tool for U.S. taxpayers - used to defer all of the capital gains taxes from the sale of a business or investment property. Tune in here for the latest news and information on the money-saving world of 1031...

All About 1031 Tax Exchanges - With


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