1031 blog - luke hays - ipx1031 1031 exchange basics (part...

Vice President [email protected] 629.203.2725 M: 629.203.2725 www.ipx1031.com/hays • 1031 Intermediaries are not regulated by the federal government and most states: This means that there are no uniform regulations or laws concerning how your funds are deposited, invested or secured by QIs. Many years ago, some investors lost their exchange funds when they were either stolen or poorly invested by unscrupulous QIs. In many instances these losses could have been avoided by conducting basic due diligence prior to selecting the QI. • Safety and Security for the transfer of your funds: With cybercrime and fraud on the rise, bank wire transfers, particularly regarding real estate transactions, have been increasingly targeted and are amongst the most costly types of cybercrime today. Selecting a QI that has a secure computer network and updates its safety precautions for holding and transferring funds would be a wise choice. • Financial Assurances for your funds: Since 1031 Intermediaries are not regulated by the federal government or by most states, they are not uniformly required to provide insurance or other protections for your exchange funds. Therefore, if your funds are lost or stolen by a QI that doesn’t provide adequate protections, the loss is borne by you. • Expertise and Strength: Similar to the lack of uniform regulation, QIs are not licensed by the federal government or by most states. This means that just about anyone can act as a QI without any training or education regarding 1031 tax deferred transactions. • Reputation: Although QIs are not regulated by the federal government, there is an industry trade association, Federation of Exchange Accommodators (FEA). Many reputable and stable QIs are members of this organization. Why IPX1031? Like Kind Exchanges, also known as tax deferred exchanges, are defined by Internal Revenue Code (IRC) section 1031. A 1031 Tax Deferred Exchange offers taxpayers one of the last great opportunities to build wealth and save taxes. By completing a 1031 Exchange, the Taxpayer (“Exchanger”) can dispose of investment or business-use assets, acquire replacement property and defer the tax that would ordinarily be due upon the sale. A 1031 Exchange allows investors to defer Federal capital gains tax, state ordinary income tax, net investment income tax, and depreciation recapture on the sale of Investment property if certain criteria are met including: • Buy replacement property for equal or greater than sold for and reinvest all proceeds • Identify replacement property within 45 days of close of sale • Purchase replacement property within 180 days of close of sale • Must Sell and Buy property that is considered “like-kind” to each other • Process must be handled by a Qualified Intermediary (QI) Yes. The IRS requires the use of an intermediary in virtually every 1031 transaction and the QI must be engaged before the relinquished property is sold. What is a 1031 Exchange? Is a Qualified Intermediary Necessary? 1031 Exchange Basics (Part One) Luke Hays, Esq. 1031 Blog - Luke Hays - IPX1031

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Vice [email protected]: 629.203.2725www.ipx1031.com/hays

• 1031 Intermediaries are not regulated by thefederal government and most states: This meansthat there are no uniform regulations or lawsconcerning how your funds are deposited, investedor secured by QIs. Many years ago, some investorslost their exchange funds when they were eitherstolen or poorly invested by unscrupulous QIs. Inmany instances these losses could have beenavoided by conducting basic due diligence prior toselecting the QI.

• Safety and Security for the transfer of your funds:With cybercrime and fraud on the rise, bank wiretransfers, particularly regarding real estatetransactions, have been increasingly targeted andare amongst the most costly types of cybercrimetoday. Selecting a QI that has a secure computernetwork and updates its safety precautions forholding and transferring funds would be a wisechoice.

• Financial Assurances for your funds: Since 1031Intermediaries are not regulated by the federalgovernment or by most states, they are notuniformly required to provide insurance or otherprotections for your exchange funds. Therefore, ifyour funds are lost or stolen by a QI that doesn’tprovide adequate protections, the loss is borne byyou.

• Expertise and Strength: Similar to the lack ofuniform regulation, QIs are not licensed by thefederal government or by most states. This meansthat just about anyone can act as a QI without anytraining or education regarding 1031 tax deferredtransactions.

• Reputation: Although QIs are not regulated by thefederal government, there is an industry tradeassociation, Federation of ExchangeAccommodators (FEA). Many reputable and stableQIs are members of this organization.

Why IPX1031?Like Kind Exchanges, also known as taxdeferred exchanges, are defined by InternalRevenue Code (IRC) section 1031. A 1031 TaxDeferred Exchange offers taxpayers one ofthe last great opportunities to build wealthand save taxes. By completing a 1031Exchange, the Taxpayer (“Exchanger”) candispose of investment or business-use assets,acquire replacement property and defer thetax that would ordinarily be due upon thesale.

A 1031 Exchange allows investors to deferFederal capital gains tax, state ordinaryincome tax, net investment income tax, anddepreciation recapture on the sale ofInvestment property if certain criteria aremet including: • Buy replacement property for equal orgreater than sold for and reinvest all proceeds • Identify replacement property within 45days of close of sale • Purchase replacement property within180 days of close of sale • Must Sell and Buy property that isconsidered “like-kind” to each other • Process must be handled by a QualifiedIntermediary (QI)

Yes. The IRS requires the use of anintermediary in virtually every 1031transaction and the QI must be engagedbefore the relinquished property is sold.

What is a 1031 Exchange?

Is a Qualified Intermediary Necessary?

1031 Exchange Basics (PartOne)

Luke Hays, Esq.

1031 Blog - Luke Hays - IPX1031

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