Extension for Hawaii

Due to the flooding happened last December 2008 in the city of Honolulu, IRS issued a Notice for 45 and 180 Day Extensions for Hawaii Areas. This is defined in the Revenue Procedure 2007-56, section 17 that allows extension if the taxpayer is located in the Covered Disaster Area or an affected taxpayer have difficulty meeting the exchange deadlines.

IF the taxpayer meets these criteria, THEN any 45 day or 180 day deadline that falls on or after the above date, is extended to the later of February 9, 2009, or 120 days from such deadline.

1031 Tax Deferred Exchange: Many Options That Each Provide Many Advantages - Part 1

One aspect to choosing 1031 Tax Deferred Exchange is that you will confront numerous options from which to make up your mind and yet be sure that whichever option you choose it will help make you a considerable amount of money such as saving on paying capital gains tax at the time of selling your current investment property in order to acquire a fresh one. In fact, it would be to your advantage to, first of all, seek out professional advice before proceeding further with regard to 1031 Tax Deferred Exchange.

List With Real Estate Brokers

Having decided that 1031 Tax Deferred Exchange is what you want, you must then list with a real estate broker all of your existing properties and also ensure that such list includes an agreement that clearly states that you are using your property to complete 1031 Tax Deferred Exchange.

1031 Tax Deferred Exchange: Many Options That Each Provide Many Advantages - Part 2

To be sure, if you go in for 1031 Tax Deferred Exchange, you will then be in a good position to roll-over all of the monies you receive when you sell your investment property which monies in turn must be used to purchase one or even several similar (like-kind) investment properties. However, during closing the proceeds must be transferred to a Qualified Intermediary who will keep the proceeds from the sale till such time as these proceeds are to be used to buy new like-kind property.

As mentioned, 1031 Tax Deferred Exchange permits you to also defer your capital gains tax as long as the entire amount of money from the sale of a property is used in purchasing similar (like-kind) investment properties. Thus, this deferment is tantamount to getting an interest-free loan for the entire amount that you would have spent on the cash sale which means that you get to retain more equity which in turn makes it possible for you to obtain properties with still higher values while of course, using 1031 exchange.

1031 Tax Deferred Exchange: Many Options That Each Provide Many Advantages - Part 3

However, 1031 Tax Deferred Exchange is only applicable as long as you sell real estate that is investment oriented and it won’t hold true if you are selling personal residential property. Also, the properties in question must be similar or more precisely like-kind which means that if you are exchanging real property then the two properties in question must both be real properties. In fact, there is also nothing stopping you from exchanging a single property for many properties or even buying a single property from the proceeds of many properties.

Not Regulated?

“I was shocked to find they weren’t regulated,” a statement from Richard DeJana, Kalispell attorney who represents an area resident who incurred losses from Sumit 1031 Exchange.

The firm declared bankruptcy and filed for Chapter 11 bankruptcy in late December after announcing it has only about $13 million on hand of the $27 million it owes its clients. Rather than investing customers’ money in short-term, liquid securities, like most accommodators do, Summit’s principals had been putting millions of dollars into real estate deals, according to a posting on the company’s Web site.

Summit specialized in 1031 tax-deferred exchanges, a type of real estate investment named after a section of the IRS tax code. The exchanges allow investors to defer taxes on the sale of investment property so long as the proceeds from the deal are held by a third party, like Summit, and reinvested within 180 days in a similar property.

Now that many in the industry are declaring the same, regulation as to who can open a 1031 exchange company is being questioned. Most states do not regulate 1031 accomodators. In fact the exact number of qualified intermediaries is unknown and under the law, a company can act as a 1031, but so can a friend.

After an exchange company in New York left more than 500 customers out $132 million in 2007, the Federation of Exchange Accommodators petitioned the Federal Trade Commission to apply registration and certification standards to the industry. The petition cited 23 cases involving $250 million losses.

Victims of abuse, including some here, have often voiced frustration with a system that required them to hand their money over to a third party but offers little protection against fraud.