Keeping The Right Name On The Paper In A 1031 Exchange

A 1031 exchange has very specific title and taxpayer requirements. Whoever the taxpayer was on the old property has to be the taxpayer for the new property. In general terms, it means that if you own a piece of property and sell it via a 1031 exchange, then you have to be the buyer of the new property.

Furthermore, any tax-paying entity that owns real estate can do a 1031 exchange, whether it is a corporation, a partnership, an LLC, a trust, or an individual. Individual members of these tax-paying entities, however, cannot solely carry out a 1031 exchange on a property owned by said organizations. The organization is the taxpayer, not the individual. The deed to a property might be in the name of a single member of an LLC. But, if it has chosen to be taxed as a sole proprietor, then all activity for the property owned by that LLC is reported on the individual (or joint) tax return of the single member. In that event, guess what? — The individual is really the taxpayer for 1031 purposes even though the deed is held by the LLC.

There is an easy rule to help you avoid trouble in all of this: Look at the tax returns and you won’t go wrong!

Are U.S. Home Prices Cooling Down?

Home prices are still growing, but it looks as though the pace is starting to slow. The price growth rate for July dropped to its lowest point in over two years. A flow of new inventory has accompanied the moderating growth of July. This will be welcome news for first-time home buyers who have been struggling with low inventory and little negotiating power in an unforgiving market. The hope is that the market is heading towards a more even position after years of shrinking inventory and out-of-control price growth.

Which U.S. Territories Qualify for a 1031 Exchange?

From the U.S. Virgin Islands to American Samoa, the United States administers quite a few territories. And for real estate investors it is important to keep in mind that while all of these territories are most certainly part of the U.S., they are not all treated in the same. So which islands contain property that is eligible for a U.S. to U.S. 1031 exchange?

There are three:

  1. Guam
  2. U.S. Virgin Islands
  3. Northern Mariana Islands

In 2008, the Treasury solidified these three islands as identical in treatment. Areas that are not on the list of coordinated territories do not contain property eligible for a 1031 exchange. However, with islands such as American Samoa and Puerto Rico now considered a Qualified Opportunity Zone, there is more than one way to defer capital gains taxes.

To learn more about Qualified Opportunity Zones continue on to here.

Where is the Fastest Growing Luxury Housing Market in the US?

Luxury home sales keep breaking records in 2018. According to Market Insider, a strong economy has created sizable demand for luxury housing. The entry-level price point for purchasing a home in half of the upper tier markets studied has surpassed more than a million dollars.

Interestingly enough, Sarasota tops the list as one of the fastest growing luxury housing markets. Despite sales prices rising more than 21 percent since last May, half of all luxury homes in the city sold within 157 days.

Luxury Home Sales in Miami Surge While Starter Homes Remain in Short Supply

2018 has been a great year for luxury home sales in South Florida. According to a new report by the Miami Association of Realtors, luxury real estate sales of properties over $1 Million have increased 21.5% and posted year-over-year increases in the last 6 of 7 months. Luxury condos are continuing to take the lead with sale increasing as much as 28%.

Homes valued under $600,000 are still facing severe supply shortages. Prices on single-family homes in Miami have continued to rise as lack of inventory and high demand plague lower tier markets.

To learn more about how you can utilize the power of a 1031 Exchange visit The 1031 Investor.

What is the Luxury Housing Market Doing Now?

Despite rising prices, the luxury housing market is seeing an increase in home sales. While many buyers are struggling to find a starter home to call their own, luxury houses are changing hands quickly in 2018. According to Realtor.com, 91 counties in the U.S. have seen an entry price level increase of 4.6%. Leaving the entry point for luxury housing at no less than $1 million. With the stock market on an upward climb and high-paying jobs growing, buyers have been more than willing to put up with the costs associated with buying and owning a luxury home.

To learn more about how you can utilize the power of a 1031 Exchange visit The 1031 Investor.

3 Surprising Things That States Count as Real Estate

While all parts of the US generally agree on what is considered real property, every state has its own unique laws and definitions. Reading through each state’s legal definition for real property brings up some interesting tid bits here and there.

1.   Riverboats

Starting in the mid 90’s casino riverboats began appearing in Indiana. At the time, the state did not allow any gambling establishments to operate on land. However, once the states began to realize what a golden goose they had, the laws were loosened and changed. Riverboat casinos in Indiana are now legally defined as real property and given the right to remain permanently moored.

2.   Shellfish Land

Some fun facts from ct.gov, the state of Connecticut’s official website.

·     Connecticut shell fishing generates $30 Million plus in farm-gate sales annually.

·     The Connecticut shellfish industry provides over 300 jobs statewide.

·     Annually, Connecticut shellfish harvests exceed 450,000 bushels of hard clams and 200,000 of bushels of oysters.

·     More than 70,000 acres of shellfish farms are now under cultivation in Connecticut’s coastal waters.

Aquaculture is big business in Connecticut. It is easy to see why the state defines underwater shellfish lands as real estate.

3.   Fossils

While legal definitions may not be very exciting, dinosaur bones are. Fossils found on real property function in a way similar to oil, gas, and minerals. While the fossils are in the ground on your property, they are treated like real estate. Idaho, Minnesota, and New York are all states that explicitly define fossils as part of an individual’s real property.

While all of these items could potential be exchanged using a 1031 exchange, as Gideon Tucker once said, “No man’s life, liberty, or property are safe while the legislature is in session.” Always consult with a local expert in your area to see what your state defines as real property.

To learn more about how you can utilize the power of a 1031 Exchange visit The 1031 Investor

Choosing Your Qualified Intermediary

5 Things to Look For

Before you can begin your 1031 exchange, you will have to select a Qualified Intermediary (QI). A good QI can make or break your exchange. To ensure that everything goes smoothly it is important to make sure that your Qualified Intermediary is actually qualified. Here are four things to look for in a QI.

1.   They should use a segregated, qualified escrow account (at no charge)

Make sure that the QI you select does not have a pooled exchange account. It is important to ensure that your exchange account is not comingled with someone else’s funds. Your QI should have a segregated qualified escrow account so that only your money is in that account and it is identifiable to you.

2.   They must guarantee their exchange

Your Qualified Intermediary should do everything in their power to ensure that your exchange is successful. A good QI should be able to assure you that your exchange will be carried out without a hitch.

3.   Audit protection – providing support and documentation if needed (at no charge)

Make sure that the QI you select keeps their records and documents tidy. Should an audit occur, you want to be certain that your QI has all the documentation you need.

4.   They must be easily accessible to answer questions (at no charge)

Avoid Qualified Intermediaries with poor communication skills. You want your QI to be reachable and ready to answer any questions that you might have.

5.   Experience

You want to look for a QI who has experience, a reputation in the industry, and who has demonstrable results. Do not select a Qualified Intermediary who does not have a history to back up their claims.

Selecting a good QI is one of the most important steps to ensure that your 1031 goes as planned. If you select the right QI to guide you through the process, the rest of your exchange will run much more smoothly.

To learn more about how you can utilize the power of a 1031 Exchange visit The 1031 Investor

6 Requirements for Carrying Out a 1031 Exchange

If you want to carry out a successful 1031 exchange, there are six requirements you will need to fulfill. All six must be met for your exchange to be recognized by the IRS. Here is a helpful little summary to get you started.

1.   The Intent to Hold for Investment

Your primary residence cannot be exchanged with a 1031. But any real estate that is demonstrably being held for business, investment, or productive use in a trade can be exchanged.

2.   45-Day Identification Rule

From the day you close the sale on your old property, you have 45 days to identify a replacement property or properties. You must compile a legible list of your selected properties for the IRS. At the end of the 45-day period, the houses on your list are final and no more changes can be made.

3.   180-Day Exchange Period Rule

From the closing on the sale of your old property, you only have 180 days to complete the whole exchange. Or until your next required tax filing, whichever comes first. Make sure you time your exchange carefully.

4.   Qualified Intermediary (QI) Requirements

Finding a QI is vital to the success of your 1031. You must find a QI before selling your old property. If you sell your property before you find a Qualified Intermediary, then you cannot exchange that property using a 1031.

5.   Title/Taxpayer Requirements

The person who pays the taxes before the exchange must pay the taxes after the exchange. If a married couple jointly holds title to the old property, they must both hold the title jointly on the new property as well.

6.   Reinvestment Requirements

If you wish to defer all taxes, then you must reinvest all your proceeds. Money that is removed from the exchange becomes taxable to the IRS while the rest remains sheltered in the exchange.

This list should help you get an idea of what it will take to carry out a 1031. With an experienced Qualified Intermediary and respect for the rules, your 1031 should go smoothly.

To learn more about how you can utilize the power of a 1031 Exchange visit The 1031 Investor.

3 Benefits of Homesteading Your Primary Residence

Homesteading your principal residence has many advantages. Below are three reasons why you should definitely consider checking to see if your property qualifies for the homestead tax exemption.

1.   Tax Exemptions

Everyone loves a property tax cut. Homesteading a house in Florida grants you a property tax exemption that is based on the assessed value of your property. It is currently possible to have up to $25,000-$50,000 deducted from your property’s assessed taxable value.

2.   Protection of Your Property

A property that has been homesteaded is protected from forced sale to satisfy debts for personal loans. This means that if you wind up owing any credit card companies an enormous amount of money, they are forbidden from coming after your home. However, homesteading your property does not protect you from foreclosures for not paying your property taxes, mortgages, homeowners association fees, and construction fees. Even with a shield, it is always a good idea to pay off your debts in a timely manner.

3.   Protection for Your Family

Homesteading your property guarantees that your family will still have a home after you are gone. Homesteading ensures that if you are married and pass away, your surviving spouse and children will inherit the estate. Even if a will states otherwise the operation of law will protect your family from being displaced from their home. The signature of both spouses is required on all documents in a homesteaded property. Even if the property is titled in one spouse’s name only.

To learn more about how you can utilize the power of a 1031 Exchange visit The 1031 Investor.