Tips for Mastering 1031 Exchanges

Why bother becoming an expert on 1031 exchanges? For starters, using a like-kind exchange instead of selling the property outright will almost certainly save you big bucks in taxes, says Jim Miller, vice president and southwest regional manager of IPX 1031 in Phoenix.

In addition, 1031 exchanges are a great estate-planning tool because heirs can receive a stepped-up basis and have any deferred taxes on the property forgiven by the Internal Revenue Service.

What’s the boot?

The term “boot” refers to any non-like-kind property that is exchanged. It is most often in the form of cash and can result when the value of the piece of real property being relinquished is greater than the value being acquired. Receiving a boot in a like-kind exchange doesn’t disqualify the exchange, it only introduces a taxable gain to the transaction. Only the gain that results from cash and unlike property is taxable.

These amounts cannot exceed the amount of the gain recognized if the property was sold in a taxable transaction.

How to calculate the gain.

To calculate taxable gain, a property seller should begin with the price of the relinquished property and then subtract the adjusted basis of the property. This amount is the realized gain.

The adjusted basis is the purchase price of the relinquished property plus any capital improvements to the property, less any depreciation. The basis amount carries over to become the basis of the replacement property.

While 1031 exchanges cannot be used for residential property that is used as a primary residence it provides a great strategy for deferring taxes on highly depreciated properties.

Source: REALTOR® Magazine Online© FLORIDA ASSOCIATION OF REALTORS

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Declining Dollar Draws Foreign Real Estate Investors

The weak dollar may be a bad thing for Americans who want to travel abroad, but there is a silver lining: More foreign buyers are making the most of their currencies by investing in the U.S. real estate. Dan Green, a certified mortgage planning specialist and author of TheMortgageReports.com, estimates that the number of inquiries he's received from outside the U.S. is probably five to 10 times larger than it was a year ago.

Foreign investors are increasingly supporting real estate markets in Miami and San Francisco, says Susan Wachter, a professor of real estate at the Wharton School at the University of Pennsylvania.New York, Chicago, and other parts of Florida are also attractive to foreign investors."

The U.S. is an enticing investment," says Phillip Hegarty, the sales director for Castleroc Estates, a Dublin, Ireland-based firm that works with Irish investors to buy residential and commercial real estate in the United States.

Source: The Associated Press, Stephen Bernard (11/09/2007)

Condos to Replace 'Sopranos' Hangout

Eight months ago Tony Soprano and his Jersey crew hung out at the fictional Satriale’s pork store for the last time, as HBO wrapped up the final season of “The Sopranos” mob drama.

Last month the life-sized pig on the top of the building came down, followed by the rest of the former storefront in Kearny, a working-class town across the Passaic River from Newark and about nine miles west of Manhattan.

"We whacked the pork store," says owner Manny Costeira, who leased the empty building to HBO.

Nine condo units will replace former storefront. The project is called "The Soprano," and prices range from $325,000 to $385,000. Construction is expected to start in the spring and would be finished in about a year.Costeira says he is still waiting for city approval before he can start selling, but he has commitments for three units.

Source: The Associated Press, Janet Frankston Lorin (11/11/2007)