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January 2017 Blog Posts (15)

Why A 1031 Exchange Instead of an Outright Sale?

A properly executed #1031 exchange allows an investor to defer paying all the capital gains taxes on the transaction. Put another way, this tax-deferral equates to a long-term and interest-free loan from the IRS. In addition, the investor retains all their gross net equity and has it available to reinvest so they can acquire bigger and better real estate. This would not be possible if they had simply sold outright and paid taxes on the sale.

This points out the superiority of a 1031…

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Added by Dr. Robert G. Hetsler, Jr. on January 29, 2017 at 8:08am — No Comments

Including Your Primary Residence In a 1031 Exchange

If you’re a lucky homeowner who has accumulated extensive appreciation in your primary home, you may be wondering how to minimize taxes when it comes time to sell. The idea of a #1031 exchange comes to mind, but then you realize that the IRS code explicitly prohibits private residences from eligibility in Section 1031.

Do you have any options to avoid hefty capital gains taxes?

One option is, of course, to use the 250,000/500,000 exclusion permitted by tax code on the sale of…

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Added by Dr. Robert G. Hetsler, Jr. on January 26, 2017 at 7:09am — No Comments

2017 Tax Reform & Section 1031

Now that the new administration is settled in, Washington legislators are turning their attention to one of the key issues raised during the recent campaign – tax reform. And with House Republicans already busy at work putting together their major tax reform proposal, one specific target remains in their sights – repeal of Section #1031 of the #tax code.

But is getting rid of 1031 exchanges the panacea that politicians believe it to be? While eliminating this part of the code would…

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Added by Dr. Robert G. Hetsler, Jr. on January 25, 2017 at 8:58am — No Comments

What's the difference between "held for sale" vs. "held for investment" in a 1031 exchange?

One of the key requirements for a real estate exchange to qualify under section 1031 for tax-deferral is that the property involved was held for either investment purposes or for productive use in trade or business. In many cases, this is a fairly straightforward proposition to prove.

However, in other exchanges, questions may arise as to whether this strict requirement has been met. For example, if you are an investor who flips properties or otherwise regularly buys and sells real…

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Added by Dr. Robert G. Hetsler, Jr. on January 24, 2017 at 2:10pm — No Comments

Can a Drop & Swap Solve Your Partnership Conflicts Over Real Estate?

When it comes to investing in investment real estate, often a group of investors with shared interests will form an LLC or Partnership to facilitate the purchase. However, as time goes on, these same investors sometimes have diverging interests about their investments. Some may want to sell and reinvest in bigger, better properties. Others might just want to cash out and move on to a new investment altogether.

So how can an LLC or Partnership address these separate…

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Added by Dr. Robert G. Hetsler, Jr. on January 22, 2017 at 10:36am — No Comments

Exchanging Personal Property Via Section 1031 of the Tax Code

Although the vast majority of #1031 exchanges involve real estate, the #tax code does permit the exchange of personal property, too. Of course, the personal property still has to adhere to the stringent requirements of section 1031. That means the personal property has to be used for business, trade or investment.

So how do you determine if the personal property you want to exchange qualifies? It starts with a determination of the asset’s nature and character, because just like with…

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Added by Dr. Robert G. Hetsler, Jr. on January 20, 2017 at 9:13am — No Comments

The Basics of NNN Lease Properties

In today’s uncertain economic times, traditional investments provide neither the stability or meaningful returns that investors seek. Perhaps that is why interest in net-leased, single-tenant real estate is skyrocketing. But for the casual investor, these properties – commonly called NNN or STNL in the industry – remain somewhat of a mystery.

Before you embark on an investment of this type, it is important to understand the basics surrounding these appealing and flexible investment…

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Added by Dr. Robert G. Hetsler, Jr. on January 18, 2017 at 12:30pm — No Comments

The Three Responsibilities of Your Qualified Intermediary

If you’re planning a #1031 exchange, you will likely require the services of a Qualified Intermediary. This individual is the one who keeps you on track and fulfills an indispensable role to keep you from violating the strict rules of the tax code.

And while the exchange process itself is relatively straightforward (once you understand the basic rules), the QI should be doing three key things for you throughout the process.

Advises on rule compliance

One…

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Added by Dr. Robert G. Hetsler, Jr. on January 15, 2017 at 4:50am — No Comments

Tax-Deferred or Tax-Free? What is it for 1031 Exchanges?

There are many myths circulating about the power of section #1031 of the US Tax Code. One of the biggest ones has to do with tax liability. Many inexperienced investors often refer to an exchange as “tax-free.” And, while that would be great if true, it is not. (Well, there is one exception, discussed below.)

When it comes to taxes and a 1031 exchange, the most important thing to understand is that an exchange is a deferral strategy not a tax avoidance scheme. You can use a 1031…

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Added by Dr. Robert G. Hetsler, Jr. on January 13, 2017 at 5:30am — No Comments

Voiding a 1031 Exchange by Violating the Related Party Rule

The end of 2016 saw an interesting case come out of U.S. Tax Court. It had to do with an attempted #1031 exchange that violated a very important provision of the code – the prohibition against related parties engaging in an exchange together.

While related parties may conduct exchanges together, the IRS requires that both parties must hold the property they receive at least two years. Failing to do so triggers immediate recognition of any gain. The single exception to this rule occurs…

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Added by Dr. Robert G. Hetsler, Jr. on January 11, 2017 at 11:15am — No Comments

Self-directed IRA: How to diversify and grow your retirement portfolio

Understanding Self-directed IRA

“The beauty of diversification is it's about as close as you can get to a free lunch in investing.” Barry Ritholtz

How do you feel about staking your entire future on the stock market? Risky, right! Who would do that? Surprisingly enough, a lot of investors are putting their money in the stock market directly or…

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Added by Dmitriy Fomichenko on January 11, 2017 at 6:29am — No Comments

How is 2017 Looking for Net Lease Investments?

With the turmoil of 2016 behind us, #investors are looking ahead to what the new year might bring. But just because the calendar has flipped to 2017, volatility and uncertainty are still at the forefront of most experts’ minds. The truth is, nobody – no matter their level of expertise – can precisely predict where the markets will go as the year unfolds.

That being said, there is a sub-sector of the commercial real estate market that, historically, has achieved an impressively solid…

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Added by Dr. Robert G. Hetsler, Jr. on January 5, 2017 at 9:58am — No Comments

The Basics of Delaware Statutory Trusts

A Delaware Statutory Trust (commonly referred to as a DST) is, as the name suggests, a legal entity created as a trust under Delaware state law. A #DST is created for real estate investment purposes, and is especially useful in a #1031 exchange.

Under a DST, investors each own a pro rata share of the DST itself. The DST in turn holds title to various real estate interests, and distributes any income received from the properties (either through rental income or the sale of the…

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Added by Dr. Robert G. Hetsler, Jr. on January 4, 2017 at 12:15pm — No Comments

Tips For Easier Garden Care

Farm fresh eggs just taste good, but have grown good for you personally personally. Eggs are so nutrient dense that they contribute a great deal more nutrition than calories: 6% of the RDA for riboflavin, 5% of the folate, 4% of the vitamin E and vitamin A, and almost 4% of the protein.

It is a straightforward thing in order to. They have a regarding nutrients that were found inside of vegetables of yesteryears. They taste better than those which usually are found found on the…

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Added by Kirsten Sue on January 4, 2017 at 9:59am — No Comments

De Facto Ways to Identify 1031 Exchange Replacement Property

Anyone who has considered a #1031 exchange to defer capital gains taxes on the replacement of business or investment property should already know about the two strict (and concurrently running) deadlines governing these transactions – 45 days to identify replacement property and 180 days to close on it.

And for many exchangers, identifying the possible replacement properties is the hardest part. For most, it will occur in one of three ways:

Three-Property Rule – Up to three…

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Added by Dr. Robert G. Hetsler, Jr. on January 3, 2017 at 1:36pm — No Comments

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