Case Studies

Case Study: A Property Improvement Exchange of Real Estate

Case Study: A Reverse Exchange of Real Estate – Parking the Relinquished Property

The Facts

We were contacted by a potential client about doing an Internal Revenue Code (IRC) §1031 tax deferred exchange.  The client needed to acquire, or risk losing, the desired replacement property (new property) in Dillon, Colorado. However, the contract with his buyer for the sale of his relinquished property (old property) in Littleton, Colorado was not scheduled to close until November 28, 2014, a month after the date of closing for the new property.  The purchase price for the new property was $562,000.

In a normal tax deferred exchange, or “forward exchange,” the taxpayer sells the relinquished property first and uses the exchange proceeds to acquire the replacement property.  This situation, in which the taxpayer needs to take ownership of the new property prior to the sale of the old property, i.e. in a reverse sequence, is referred to as a “reverse exchange.”

Case Study: A Reverse Exchange of Real Estate – Parking the Replacement Property

Download the free step-by-step guide, Parking the Replacement Property in a Reverse Exchange.

The Facts

On May 7, 2014, an attorney from central Illinois contacted us on behalf of his client, Mr. Lodo, who wished to do an Internal Revenue Code ("IRC") §1031 exchange. Mr. Lodo needed to acquire, or risk losing, his desired replacement property, however, he did not have a buyer in place for the sale of his ...

Case Study: A Forward Exchange of Real Estate

The Facts

A qualified intermediary (QI) company received an inquiry from some taxpayers, who we will call Mr. and Mrs. Pike, regarding facilitating a real estate exchange.  The QI, a personal property specialist, was kind enough to refer the matter to North Star Deferred Exchange,...

Limit Taxes Through 1031 Exchanges

Rental equipment qualifies for this useful tax solution and should be considered a viable choice for your business

At 39.1 percent, the U.S. corporate income tax rate (average combined federal and state) is the highest in the industrialized world. Most of us want to find ways to (legally) limit our taxes. For equipment lessors, one of the best and most commonly overlooked ways to limit/defer taxes is to “exchange” (rather than sell outright) old or obsolete equipment.

Many people have been led to believe 1031 exchanges are available only on real estate, but this is not true. “Personal property” (rental equipment) 1031 exchanges have been available since at least 1935.

What is a 1031 exchange?...

Case Study - Single Exchange: Janssen Brothers Engineering and Construction

Janssen Brothers Engineering and Construction (JBEC) is a large, top-rated contracting firm based in the Midwest. They routinely buy and sell a variety of heavy equipment in the course of business.

In 2009 JBEC decided to move several older cranes and to purchase a new model from a local dealership. The existing cranes were fully depreciated for tax purposes, and the company anticipated a hefty tax bill upon sale.

JBEC, which had conducted several single exchanges in the past, consulted with its Accruit Client Service Manager and learned that its plans represented a very simple straightforward 1031 exchange. The CSM helped them structure the exchange, at which time they sold the relinquished assets (four Grove RT series and one Grove TMS series) at a Ritchie Bros. auction.

Case Study (Complex Single Exchange): Hartson Oil

Hartson Oil is an independent energy firm focused on the exploration, development, acquisition and production of domestic natural gas and crude oil. Like most companies in this industry, Hartson routinely buys and sells a variety of corporate assets, including real estate and tangible assets (vehicles, drilling and production equipment, piping and casing).

THE PROBLEM
Hartson faced a complex exchange scenario. The company planned to purchase multiple strings of tubing and casing over a period of several months and they intended to sell scrap tubing and casing sometime between the first set of purchases and the last. The exchanged equipment was to be carved out of a much larger sale and about 25% of the equipment sold wasn't going to be replaced. The ...

Case Study: American Value Automotive

Accruit 1031 like-kind exchanges drive multi-million dollar benefit for major auto rental licensee...

American Value Automotive* (AVA) is a large licensee serving the western United States. Their portfolio includes light trucks and automobiles (cars comprise roughly 95% of their assets).

AVA sells 3,000 vehicles per year, generating $72MM in revenue. The assets have a five-year MACRS life, but the average hold time is just six months. The company’s combined state and federal tax rate is approximately 40%.

Oil & Gas: 1031 exchange program generates massive cash flow and asset management benefit for energy industry giant IconX

IconX Energy* is one of the world's largest energy companies, providing customers around the globe with fuel for their automobiles, electricity for their homes and a wide range of petrochemical products for every phase of their lives. As with any large enterprise, IconX is constantly buying and selling large quantities of assets, and in the process, dealing with the complex tax implications of these activities.

IconX had historically employed 1031 like-kind exchanges (LKEs) for real estate and leasehold transactions, but several years ago company executives learned that LKEs could also be used for non-real estate assets - vehicles,...

LKEs and Bonus Depreciation: a case study

Which is better for the bottom line, LKEs or no LKEs? Well, that's an obvious one. Okay, which is better, LKEs or Bonus Depreciation? That's a trick question, because it's not an either/or. However, in an environment where you have have Bonus, you're running 1031 exchanges on some assets, and there's "Bonus hangover" and uncertainty about future tax rates to think about, it helps to take a good look at a real-world case that illustrates how the pieces fit together.

Our Silver State Equipment case study provides just such an example. This large sales and rental dealer buys and sells a large volume of equipment each year, and has devoted considerable time to understanding its cash management and tax deferral options.

Silver...

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