Benash Real Property Exchanges provides 1031 tax-deferred exchange service to both individuals and businesses. We give the same attention to all clients, no matter how large or small. The services we provide are tailored to the unique needs of each client, ensuring the best possible results and maximized returns. Our firm remains on the cutting edge of IRC Section 1031 law. We are well-informed and continually adapt to the ever-changing world of 1031 tax-deferred exchange law.
Our Commitment
At Benash Real Property Exchanges, we treat our clients with courtesy and respect. We guarantee efficient and timely 1031 exchange services that achieve anticipated results. Our years of experience and notable expertise ensure that your exchange will be executed to your satistaction.
Every 1031 exchange relationship begins with a personal contact with our Certified Exchange Specialist www.1031CES.org . Our goal in every exchange that we facilitate is to provide our clients with a level of personal service and commitment which will far exceed expectations. We have the specialized knowledge to make your 1031 exchange predictable, safe and profitable.
Our record
Our consistent track record of uncompromising ethics instills confidence and trust. We use state of the art technologies to ensure up to the minute information from the real estate tax world. This allows us to respond quickly, and give you the most relevant information and perspectives.
Experienced Ethical Economical
Free Consultation $500 Exchange Fee Licensed & Insured
Benash Real Property Exchanges
6726 Parkside Lane
Tacoma, Washington 98407
(253) 223-0537
FAX (253) 761-7475
philipdavid@aol.com
ALL ABOUT 1031 TAX-DEFERRED EXCHANGES
Benash Real Property Exchanges
What are the components of a tax-deferred exchange?
· There must be a transfer of property for property.
· The exchanger must document thoroughly throughout the exchange that he or she is conducting a tax-deferred exchange. This documentation can easily be accomplished by utilizing an independent exchange facilitator www.CES.org .
· The exchanger must designate replacement properties in writing that he or she may purchase to replace the sold property within 45 days. The exchanger must close on the new property within 180 days of sale of the old property.
· The exchange facilitator steps in and sells the exchanger’s initial property after the exchanger has approved the sale terms. The exchange facilitator then holds the proceeds of sale for a period not to exceed 180 days. Once the exchanger secures a purchase agreement on the new property, the exchange facilitator steps in for the exchanger and purchases the desired new property and arranges to deed the new property to the exchanger.
Why should I Exchange?
· An exchange will defer federal, and in many cases, state taxes on appreciation and depreciation.
· An exchange will acquire the right kind of investment property for your situation. You can exchange almost any type of real property for almost any other type of real property. Exchanging is remarkably flexible to meet your needs.
· Exchanging builds a person’s wealth. Selling an investment property with a taxable gain (combination of appreciation and depreciation) results in a federal tax liability of at least 20% of the gain. This can be entirely deferred. The result is that the deferred taxes remain in the exchanger’s portfolio invested in another property more suited to the investor’s current needs. Exchange costs are minimal.
How do I get started in an exchange?
· Consult with your tax advisor and/or lawyer to determine if an exchange will help you build or maintain your wealth.
· Find an exchange facilitator www.CES.org . Your advisors can help you find one, BUT they cannot be your facilitator. Provide information about the property you are exchanging to the facilitator. A good facilitator will work with you and your advisors to thoroughly document your exchange.
Is an exchange hard or risky?
· A tax-deferred exchange is no more difficult than selling and buying a piece of real estate except both transactions must close within 180 days of each other.
· The biggest risk is that upon IRS review your exchange is disqualified. If this happens, you owe the taxes you tried to defer. By following your tax advisors guidance and meeting timelines established by your exchange facilitator, your exchange will be successful.
· The exchange facilitator holds your money while you search for and acquire your new property. Choosing a Certified Exchange Specialist www.1031CES.org eliminates any risk.
Conclusion:
Exchanging builds wealth for those who recognize the benefits.
Benash Real Property Exchanges
6726 Parkside Lane
Tacoma, Washington 98407
(253) 223-0537
FAX (253) 761-7475
philipdavid@aol.com
VACATION HOME MAY BE EXCHANGED
NEW
The IRS has issued a new Revenue Procedure establishing a safe harbor under which it will not challenge whether a dwelling unit qualifies as property held for productive use in a trade or business or for investment for purposes of Section 1031. Rev. Proc. 2008-16 is applicable to any dwelling unit which has been occupied by the taxpayer before the exchange or is occupied by the taxpayer following the exchange. The three most common scenarios to which it would apply are:
(1) a vacation rental home used by the taxpayer before or after the exchange;
(2) a residence from which the taxpayer has moved and has rented prior to the exchange; and
(3) a rental property into which the taxpayer has exchanged and occupied on a part-time basis for the taxpayer's personal use or subsequently has determined to convert to the taxpayer's residence. The IRS has adopted a very conservative approach, which is based on the rules related to deductibility of expenses related to vacation homes which are occupied part-time by the taxpayer/owner.
Under Rev. Proc. 2008-16, a dwelling unit that a taxpayer intends to be relinquished property in a Section 1031 exchange qualifies as property held for productive use in a trade or business or for investment if:
(1) the dwelling unit is owned by the taxpayer for at least 24 months immediately before the exchange (the "qualifying use period"); and
(2) within the qualifying use period, in each of the two 12-month periods immediately preceding the exchange, the taxpayer rents the dwelling unit to another person or persons at a fair rental for 14 days or more, and the period of the taxpayer's personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental.
The same rule applies to replacement property. A dwelling unit that a taxpayer intends to be replacement property in a Section 1031 exchange qualifies as property held for productive use in a trade or business or for investment if:
(1) the dwelling unit is owned by the taxpayer for at least 24 months immediately after the exchange (the "qualifying use period"); and
(2) within the qualifying use period, in each of the two 12-month periods immediately after the exchange, the taxpayer rents the dwelling unit to another person or persons at a fair rental for 14 days or more, and the period of the taxpayer's personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental.
For example, if the taxpayer owned a vacation rental property which was rented at a fair rental for eight months (240 days) during each of the two years prior to or following the exchange, then the property would be within the safe harbor if the taxpayer used that property for personal use 24 days or fewer during each of those two years. At the other extreme, the taxpayer could occupy the property for two weeks during each of the two years before or after the exchange, rent the property to a third party at a fair rental for two weeks during each of those two years, and leave the property vacant for the remainder of the time.
The IRS is also applying a broad definition of personal use. The taxpayer is deemed to have used a dwelling unit for personal purposes if used by:
(A) the taxpayer or any other person who has an interest in such unit (including a tenant in common), or by any member of the family of the taxpayer or such other person;
(B) by any individual who uses the unit under an arrangement which enables the taxpayer to use some other dwelling unit (whether or not a rental is charged for the use of such other unit); or
(C) by any individual if rented for less than a fair market value rental. A taxpayer may rent the dwelling unit to a family member if the family member uses it as a principal residence (and not a vacation home) and the family member pays fair market rent. Some taxpayer usage may be allowed for repairs and annual maintenance, to the same extent that the IRS allows such use by its regulations with regard deduction of expenses related to rental properties.
Rev. Proc. 2008-16 is consistent with the conservative approach to the exchange of secondary or vacation residences which we discussed in our newsletter of March, 2006. It is also consistent with the case of Moore v. Commissioner, which was discussed in our December, 2007 newsletter. Rev. Proc. 2008-16 is effective for exchanges of dwelling units occurring on or after March 10, 2008.
A "safe harbor" means that the IRS will not challenge the qualification of the property for exchange purposes if these tests are met. Thus, it provides a bright line test for taxpayer to know for certain that a dwelling unit will qualify. Failure to meet these tests does not necessarily mean that the dwelling unit does not qualify for exchange. The ultimate test is clearly the statutory language of whether the property is held “for productive use in a trade or business " or " for investment". There certainly will be a number of instances where property which does not meet the requirements of the Revenue Procedure will nevertheless meet the statutory test for qualification as exchange property. However, Rev. Proc. 2008-16 is a clear indication that the IRS will be relatively conservative in making its determination as to whether or not property qualifies. If you are contemplating an exchange out of or into dwelling unit(s) in a transaction which does not meet the tests of Rev. Proc. 2008-16, you should consult carefully with your tax professional regarding the particular facts and circumstances which support the qualification of that property for exchange purposes.
Benash Real Property Exchanges
6726 Parkside Lane
Tacoma, Washington 98407
(253) 223-0537
FAX (253) 761-7475
philipdavid@aol.com