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1031 Like Kind Exchanges..7 DO NOT DOs

7 "DON'Ts" 1031 EXCHANGERS Should Know

 Over my years as a REALTOR® in the Greater Asheville, NC area, I have seen strong appreciation in the real estate market. 

During that same time,
I also have noticed with interest the increasing number of clients  who are approaching creative-retirement ...the famous (or maybe infamous) "baby boomers".

 I don't know if there is a connection between the baby boomers and 1031 investing in Asheville,  but,  just in the past few years, I can tell you for sure that  the demand for information about 1031 Tax Deferred Exchanges under Carolina blue skies has "flowered".

( Carolina blue skies and flowers photo,
by Green-o-Lina)


Also, I notice a trend  in that more and more my clients want to know about 1031 "green" or ECO-friendly investments and whether they can qualify their vacation/second homes for an Like-Kind Exchange.

Although I have done many successful 1031 Exchange transactions, and have taken advanced training in this subject area I am NOT an expert on the intricacies of the IRS tax code. I like to refer my clients to those who are experts for details about the mechanics of the 1031 Exchange, especially in terms of Vacation Homes.

 

One thing I know for sure--In order to conduct a valid 1031 Exchange it generally is necessary to have such property rented to unrelated parties for a period of time both BEFORE and after the exchange, for example.) In making sure a property actually qualifies for the 1031 requirements INTENT is all-important.

 

In this regard, there are many details that a Qualified Intermediary  explains and handles.Please do contact a QI before investing.

THE 7 DO NOT DO LIST    I can suggest that investors DO NOT :

1) inadvertently indicate in a Contract that you intend to live in the property,
2) sign a listing agreement soon after its purchase,
3) apply for “owner occupied” financing on the property,
4)  move into that property within a specified period of time,
5) ignore rental history (it must be rented by its tenants for a significant time)
6) claim the "mortgage interest" deduction for the property on yours tax return,
7) treat a 1031 investment property as a "time-share" arrangement.  Section 280A of the Tax Code spells out the Test. Personal use of the property may not exceed the greater of: a). Fourteen (14) days; or b). Ten percent (10%) of the number of days that the property is rented at fair market value to others.

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Comments

Good summary of info. Thanks
Posted by Ginger Sala, Wilmington NC Real Estate & Relocation~ (Wilkinson & Associates, Wilmington NC) almost 12 years ago
I read you second 1031 first and both are very educational. Thanks for bloggin.
Posted by Susan Trombley, Broker/Realtor, Raleigh, Cary, Wake Forest, Youngs (Trombley Real Estate) almost 12 years ago
Tell me more about 1031s.
Posted by Arlene Brown (Eco Steward Realty) over 11 years ago
Arlene...Here are links to other pieces I have written on 1031s. Hope they will prove useful to you!




1031: The Budding Trend in 1031s, SRI REITs, the SRPI Green Real Estate Funds Investing - 01/13/07 11:03 AM
Recently Bill Westel commented on my blog on  indicators pointing to Green homes being the standard by 2010  that "if one were smart finding the stocks of companies that build green home products probably would be a good investment!"  Since I write on future trends in the real estate market, Bill's remark ... (8 comments)

1031: 1031s in the Mountains for 2007 - 01/04/07 10:49 AM
 
"Baby boomers" who, like their grandkids, are all bundled up for cold weather up north, are seeking the warmer climes and investment potential in the Greater Asheville Area.
They  tell me they are ready to let their wealth "flower" in years to come. Interestingly, the demand for 1031 Tax Deferred Exchanges has ... (6 comments)

1031: 1031 and ECO conscious Investing: Tips on Finding THE QI for You - 10/13/06 08:20 PM
These days it seems that more and more folks are opting to exercise a "Green-Sustainable" 1031 Exchange... This is the first time quite a number of them "ECO conscious" investors have taken an interest in this tax advantage. For the Exchange to work, it is of paramount importance to have a ... (2 comments)

1031: 1031 ..7 DO NOT DOs - 10/13/06 07:55 PM
7 "DON'Ts" 1031 EXCHANGERS Should KnowOver my years as a REALTOR® in the Greater Asheville area, I have seen strong gains in the real estate market. During that same time, I also have noticed with interest the number of clients I meet here in the Asheville area who are approaching creative-retirement . ... (3 comments)

1031: 1031 Like-Kind Exchange~ Farm= Condo? - 10/13/06 07:10 PM
The other day, as I mentioned in an earlier BLOGhttp://activerain.com/action/blogsview/1-31-Pure-Possibility-2-?14019 a novice "Green"  investor and I were talking about the pros and consof the 1031 Like Kind Exchange. (Good info on the 1031 is available at NAR: http://www.realtor.org/libweb.nsf/pages/fg408 )She had heard "by the grapevine" and mistakenly believed that|she absolutely had to acquire property exactly ... (0 comments)

1031: 1031 = Pure Possibility (2) - 10/11/06 10:42 PM
I like the idea of talking with serious Investors...I am seriously attracted to getting right to the Point.The 1031 http://www.janeanne.com/resources.asp  provides this for me and my team.
I like the idea of serious Investors also being serious Stewards of the LAND...and especially the beloved land of my far-Grandfather here in the Appalachians.The 1031 Like-Kind ... (0 comments)

1031: 1031 = Pure Possibility - 10/11/06 06:47 PM
OK! What Are They...REALLY!?? Pure Possibility!
We all may be familiar with the standard definition...."The 1031 Like Kind Exchange is a transaction that involves property held for productive use in a trade or business or for investment (except inventory and stocks and bonds) for property of the same type."
These little tax-deferral treasures ... (1 comments)

1031: The "Win-Win: Scenario in the Practice of Value-Added Real Estate (part 2) - 10/08/06 03:35 PM
 Looking at a  broader view, the "win-win" approach includes natural capital.The direction in which not only the transaction process,but an entire value-added real estate portfolio can grow via the1031 Like Kind Exchange or Self-directed IRA investment strategycan create positive possibilities now and into the future for all concerned.
Here is one example ... (2 comments)
Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) over 11 years ago
Hi Ginger...I just found your comment...i placed a number of links above if you find the topic of 1031s of interest...I love the idea of eco-wise investing...and..you being an eco-nut..think you may, too :-)
Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) over 11 years ago
Hi Susan...I just found your comment...sorry it took a while to get back with you...I just posted a bunch of links that may be of interest to you above. let me hear back from you. Hope all is well in your neck of the woods in NC!
Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) over 11 years ago

janeAnne

 The use of 1031 Exchanges to defer capital gains tax upon the sale of a property is becoming more common. Your suggestion for retiring 'boomers' to utilize this method is a really good idea. I plan to explore it myself.

Posted by Sami Forrest (Eco-Steward Realty) over 11 years ago
JaneAnne,

I'm just launching a new 1031 calculator and I'd love to get your feedback on it.

It's at www.1031summary.com

Let me know what we could do to improve on it.  Constructive comments would be appreciated.  I'm also considering the possibility of co-branding it, so let me know if that would be interesting to you.

Also, for 1031 advice, the best 1031 attorney I've met is a guy named James Brennan.  He's the 1031 expert from Wachovia.  You can find his ActiveRain profile here and he's great at answering questions.  His website is www.Inside1031.com

Regards,

DROdio

____________________________________________________
Daniel Rubén Odio-Páez
Owner and Managing Broker
Toll-Free, Direct to Me: 1-877-437-6346
Private Fax: 703.997.8872
Email: Daniel@DROdio.com
AIM: DROdio
Web: www.DROdio.com
As seen in: The Discovery Channel, Wall Street Journal, Washington Times,
Forbes Magazine, LA Times, Washington Business Journal & many others.

Posted by Daniel Odio (DROdio Real Estate, Inc) over 11 years ago
I am a 1031 investor. This is very helpful information. I will also check out Mr. Odio's calculator. Thanks for all the work you do.
Posted by John Thomas over 11 years ago
Sami...I really like the idea of working with young investors who can start out with a property at (say) age 30 and then work the 1031 exchange over theyears until they retire... that 100K proeprty may end up a 500K+ poreprty and all the taxes they have deferred in the years between beginning their program and when they opt out are a HUGE benefit for them.
Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) over 11 years ago
DROdio...I checked out your calculator and found it very intereting. I commented on it on another blog! THX for the heads-up!
Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) over 11 years ago
Daniel...PS...I also went o your web site. I noticed that your clients seemed to glow with happiness :=)
Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) over 11 years ago
John...How did YOU find the calculator. We would like to know how an investor relates to it.
Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) over 11 years ago

Great information, janeAnne - thanks for sharing this with the community.  I believe 1031 exchanges are already, and will become even moreso one of the most important retirement vehicles for baby boomers and all of the generations that follow.  Having recently sold and purchased my own 1031 properties over the past year has equipped me to be a great resource for my clients withing to expore this option to real estate investment.

Everyone I have talked with for guideance regarding 1031 exchanges (intermediaries, accountants and other real estate professionals) has told me that although the 1031 tax law is not 100% clear, the safest route is to keep 1031 properties at least 366 days.  Doing this ensures that the purchase and sale of the exchange property is conducted in different calendar years, always a good thing from the IRS perspective!

By the way, we lived in Tryon from 2001-2003 and very much enjoyed your area, including Hendersonville and Asheville!

Thanks.

John Allaire - Realtor®

Bott and Sold Real Estate, LLC

Eden, Utah

Office:       801-745-2619
Toll Free:   877-200-2420
Fax:          877-200-2420
Web:        www.RockyMountainHomes.net  

Posted by John Allaire, Recreational Property Specialist (Destination Properties) over 11 years ago
janeAnne There is so much to learn about 1031 Exchanges. It would be interesting to have more discussion about it on an ongoing basis. I used the services of a local company in Asheville and they enjoy offering classes about their services.
Posted by Sami Forrest (Eco-Steward Realty) over 11 years ago
John...You wrote: "1031 exchanges are already, and will become even moreso one of the most important retirement vehicles for baby boomers and all of the generations that follow..." I have to smile at that, as this concept has intrigued me for many years. WHAT IF, for example, a young couple started out investing in real estate using the 1031 tax-deferred exchange option?? Can you imagine what their retirement could look like??
Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) over 11 years ago
Sami...You mentioned on-going education in terms of the 1031 Exchange. I have to say that I think this is very wise!!! I myself have taken at least 6 classes  and plan to do another class this year. At our Firm we have 1031 Qualified Intermediaries come in about twice a year to tell us about their services and keep us abreast of the details.
Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) over 11 years ago
Joshua..ABSOLUTELY! My Firm always, alwyas  , always recommends FEA members!!!!Thanks for bringing that up!!!
Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) over 11 years ago

Everyone~

I notice a trend  in that more and more my clients want to know about 1031 "green" or ECO-friendly investments and whether they can qualify their vacation/second homes for an Like-Kind Exchange..are you ntoicing this trend toward"green" interest and investing as well?

Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) almost 11 years ago
janeAnne we have not seen too many 1031 exchanges in So. NH.  However, I have gone to several classes on 1031 exchanges and it is important information to have.  I liked your simple, easy to understand list.  Also, thanks for all the links.
Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) almost 11 years ago

Joan~

I try to take a 1031 update class almost every year. So many changes can happen, and there seems to be new information each year. You may want to check out Matt Linville's BLOG for the latest 1031 information, too. He is a qualified intermediary and a reputable professional.

Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) almost 11 years ago

1) inadvertently indicate in a Contract that you intend to live in the property,

3) apply for “owner occupied” financing on the property, 

Hi JaneAnne - no time to read through the comments, I will come back and do that. I do feel from a lending aspect the 2 guidelines above are EXCELLENT advise.  Far too much of this went on in recent years and it is coming back to bite us all. Thank you for another well written article filled with good advice. This is why I subscribe and read your blog! (if I can borrow words from one of my great friends!)

Posted by Mary McGraw, 2015: Solar Energy Is Still A Simple Machine! (GLREA) almost 11 years ago

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