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Monday, Feb 6, 2012
Andy Gustafson
Section 1031 of the Internal Revenue Code (IRC) requires the knowledge of many 1031 exchange tax rules. Violation of just one can jeopardize the tax deferral. In addition to the federal requirements, each state can legislate their own requirements as have Washington, Oregon, California, Idaho, Nevada, Colorado, Virginia and Maine. The state provisions focus on the protection of their... Read More
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Thursday, Feb 2, 2012
Andy Gustafson
A 1031 exchange is many things but at the core, it is a tax deferral. When real and personal property is held for productive use in a trade, business or for investment is sold, federal and state capital gains and recaptured depreciation taxes are triggered that can amount up to 40 percent of the sales price. The tax is postponed when replaced with like-kind property within 180 calendar days of... Read More
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Monday, Jan 30, 2012
Andy Gustafson
The kids have grown, the company no longer uses the property as a retreat, the taxpayers want to downsize or the price offered represent a number of reasons why taxpayers decide to sell their ranch. When selling, taxpayers want to know what the tax implications are, if the capital gains taxes can be deferred, and what planning steps are required.
Two Tax Deferral Strategies
The tax... Read More
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Thursday, Jan 26, 2012
Andy Gustafson
Deferred gain is the postponement or delay of paying the recognized gain. Recognized gain is the tax triggered when an asset is sold and determined by imputing the appropriate federal and state capital gains rate and recaptured depreciation tax rate of 25 percent on depreciation taken. Recognized gain is the tax paid on the realized gain.
Realized Gain
Realized gain is the value in... Read More
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Monday, Jan 23, 2012
Andy Gustafson
The character of a 1031 exchange property or primary residence can always be converted between personal and rental use. A property acquired as a rental property in a 1031 exchange can be converted to a primary residence by the facts that support the intent. Time is one fact of many, while additional supportive facts include where children attend school, where mail is received and the address... Read More
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Thursday, Jan 19, 2012
Andy Gustafson
Internal Revenue Code (IRC) Section 121 provides each taxpayer filing a federal tax return an exclusion on capital gains tax when selling their primary residence. Every two years, $250,000 for those filing a single return and $500,000 for those married filing a joint return is provided given:
The property represents their principal residence
The taxpayer has lived in the home for... Read More
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Monday, Jan 16, 2012
Andy Gustafson
A 1031 construction exchange enables the taxpayer to defer federal and state capital gains and recapture depreciation taxes on the sale of existing property, and construct improvements to a replacement property. In what is known as a 1031 tax deferred exchange, a construction exchange of equal or greater value to the old or relinquished property is quite common.
Internal Revenue Code... Read More
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Thursday, Jan 12, 2012
Andy Gustafson
For those not familiar or a bit rusty, this article looks at the 1031 exchange definition including what, when, why and how of Internal Revenue Code (IRC) Section 1031 tax deferred exchanges. The Internal Revenue Service refers to 1031 exchanges as tax-free exchanges because the outcome in the year a 1031 exchange concludes is that no gain or loss is recognized meaning that no tax is paid.... Read More
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Monday, Jan 9, 2012
Andy Gustafson
Drop and swap, or changing the entity on title to reflect partner names and their partitioned interest, is a tax deferral strategy deployed in 1031 exchanges requiring proper planning and understanding of the federal tax implications. The consequences of a poorly implemented drop can result in an Internal Revenue Service (IRS) audit and civil and criminal penalties if the intent is to defraud... Read More
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Thursday, Jan 5, 2012
Andy Gustafson
Considering a 1031 exchange ? Then you most likely have evaluated the tax consequences and determined that the tax deferral of capital gains makes sense. As a Qualified Intermediary, clients tell me the primary reason they initiate a 1031 exchange is the ability to defer the taxes. In addition, they have a new asset to depreciate, either real or personal property, offsetting federal income... Read More
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Monday, Jan 2, 2012
Andy Gustafson
When H.R. 3765, the Temporary Payroll Tax Cut Continuation Act of 2011 was signed by President Obama on December 23 rd , 100 percent bonus depreciation or the ability to quickly write off equipment purchases ended. Congress was not able to offset the expense with equivalent revenue generators.
Bonus Depreciation
Since 2010, bonus depreciation allowed businesses to write off 100 percent... Read More
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Thursday, Dec 29, 2011
Andy Gustafson
The Foreign Investment Real Property Tax Act (FIRPTA) of 1980 was implemented to capture capital gains taxes from non resident aliens selling real property in the United States. If a foreign person or nonresident alien is a party to a 1031 exchange, FIRPTA reporting and withholding requirements must be examined. A foreign person includes a foreign corporation, foreign partnership, foreign... Read More
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