1031 News

Representative Steve Stivers Calls for Preservation of Like-Kind Exchanges

Like-Kind Exchange News Round-Up, June 18 – June 24

Last week we heard a chorus of voices from around the web urging the preservation of like-kind exchanges in any forthcoming tax reform. Graniterock CFO Steve Snodgrass characterized the unprecedented cross-industry support this way:  "Rarely do the interests of small businesses owners, construction equipment intensive businesses and a broad range of local entrepreneurs agree with almost a century of federal income tax policy — especially when it results in billions of dollars in taxes being paid. But fortunately for the economy, they...

Rules for Real Estate and Personal Property Exchanges are not always of Like-Kind

Differences between Real & Personal Property Exchanges

The 1991 Treasury Department regulations set forth detailed guidelines for tax deferred exchanges of real property and personal property. Prior to that time, exchanges could be done but very little guidance was available to make sure they were done correctly. This set of rules and regulations covered like-kind exchanges of both real and personal property. However, these two types of exchange property are not covered the same way. Below, I’ll summarize some of the differences...

Bloomberg BNA Report Addresses Farmer Concerns over Tax Reform

It is unclear where like-kind exchanges stand in forthcoming tax reform, but any tax plan that attempts to replace like-kind exchanges with immediate-expensing would create a big gap for taxpayers significantly invested in land assets since the immediate-expensing provision in the House Republican tax reform blueprint doesn't apply to land. This Bloomberg BNA Daily Tax Report from June 1, 2017 examines the particular plight of farmers in this scenario, for whom such a plan would be disastrous.

Read...

Ritchie Bros. Acquisition of IronPlanet Nears Completion

In mid-May, Ritchie Bros. received unconditional antitrust clearance from the U.S. Department of Justice for its acquisition of online auctioneer, IronPlanet. Ritchie Bros.' acquisition of IronPlanet will officially close in the coming weeks, further diversifying the channels through which customers buy and sell equipment. According to Jim Barr, Ritchie Bros. group president of emerging businesses, brand innovation and technology, the company has shifted strategically in the past few years from auction to multichannel asset disposition, and the IronPlanet acquisition was the next logical step in that strategy. “Each company has a great set of solutions," Jim Barr told Construction Equipment Guide. “We won't be getting rid of any of them. We want our customers to choose whatever solution best suits their needs.”

Read the full article about Ritchie Bros.’ Iron Planet acquisition at ConstructionEquipmentGuide.com.

Who is disqualified from facilitating a 1031 like-kind exchange?

Creation of the Role of Qualified Intermediary in the Treasury Regulations

Prior to the Internal Revenue Code Section 1031 Treasury Regulations issued in 1991 governing exchanges, it was difficult to arrange for the taxpayer’s buyer to actively participate in the taxpayer’s exchange transaction. It could not be accomplished without the buyer’s significant involvement. However, buyers were not typically motivated to assist in the seller’s attempt at tax deferral. The 1991 regulations sought to deal with this thorny problem by creating a new entity known as a qualified intermediary (QI).

The QI would serve as an intermediary to whom the...

Reduce Tax Exposure on Heavy Equipment Sales

For owners of heavy equipment, replacing or upgrading is a necessity. Newer, faster, more powerful machinery helps expand your capabilities and increase your operating efficiencies, and it allows your crews to operate more safely. For a lot of businesses, this means a trip to your preferred equipment dealer to trade in your old iron for new iron. However, if you’re not exploring all of your options, you could be missing out on the chance to maximize your buying power by reducing your exposure to the taxes associated with such transactions.

Trade-in Treatment

Most equipment owners understand the benefit of trade-in treatment. Instead of selling your old equipment to a third party for cash, you trade the equipment in to the dealer who then applies the value toward the purchase price of new equipment. This approach allows a permanent reduction of the sales tax liability related to the replacement equipment. Trading in equipment is a simple and great value-add for equipment dealers, but how much is the equipment owner truly saving?  Remember that your trade-in...

Is Early Release of Exchange Funds Possible Under 1031 Exchange Rules?

Changing Tax Laws Create Unique Opportunities

The results of the recent election cycle will have a profound effect on the United States income tax system.  With Republican control over both chambers of Congress and the Oval Office, we can expect bold moves in tax reform—bold, but not unexpected.  In anticipation of a reform-friendly environment, the House Republicans, prior to the November elections, released an outline for future tax reform.  Released on June 24, 2016 and titled, “A Better Way, Our Vision for a Confident America,” the document is the foundation for the Republican’s tax reform efforts.  The outline is also referred to as the “House Republican Blueprint” (HRB), and while only 35 pages in length, it seeks to begin a “conversation about how to fix our broken tax code.”

While few can accurately predict the outcomes of 2017 tax reform, the consensus view is that corporate tax rates will be reduced from current levels. While the timelines and the degree of these reductions are unknown, savvy CFOs are recognizing opportunity in the face of this uncertainty. Many tax advisors are looking...

Avoid Boot from Rent and Security Deposits in a 1031 Exchange

Taxable Boot Related to Prepaid Rent and Security Deposits

In a standard closing (not involving a 1031 exchange), it is typical for the prepaid rent and security deposits being held by the seller to be treated as a credit to the buyer at closing.  In that context, the net amount paid to the seller for the property at closing is simply reduced.  However, this same practice in connection with a sale of ...

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