1031 News

What are safe harbors and why are they needed?

The 1991 tax deferred exchange regulations provided for various “safe harbors” to allow certain specific actions set forth in the regulations to be utilized by parties without otherwise running afoul of the rules. Without the safe harbors, these actions would disqualify an exchange. These safe harbors were put into the regulations as solutions for problems in the mechanics of an exchange prior to the 1991 regulations and in order to make a delayed exchange easier to accomplish. Some of these safe harbors have come to be used in almost every single transaction, while others are seldom used. Let’s take a more detailed look at these safe harbors:

• Security or Guaranty Arrangements
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Ritchie Bros. and IronPlanet have announced an agreement under which Ritchie Bros. is acquiring IronPlanet for approximately $758.5 million U.S.

According to Construction Equipment Guide, IronPlanet "complements Ritchie Bros.' primarily end-user customer base, as it focuses largely on the needs of corporate accounts, equipment manufacturers, dealers and government entities in equipment disposition solutions."

Ritchie Bros. has simultaneously announced a strategic alliance agreement in which they will become Caterpillar's preferred global partner for live onsite and online auctions of used Caterpillar equipment. This strategic alliance expands on existing agreements between Caterpillar, its dealers, and IronPlanet; it becomes effective when the Ritchie Bros. acquisition of IronPlanet is completed.

More at constructionequipmentguide.com

In 1031 Like-Kind Exchange Pitfalls to Avoid, we examined 1031 exchange practices that could inadvertently cause an exchange to go awry.  Most of those examples pertained to the taxpayer coming into constructive receipt of funds.  Here, we’ll look at a variety of other practices where problems sometimes occur.

1031 Exchange Pitfall No. 7 – Execution of the Exchange Agreement and Identification Forms

Often ...

A successful 1031 like-kind exchange requires careful planning.  Planning should include:

• Reviewing the transaction’s form and timing
• Understanding the like-kind exchange regulations
• An examination of the equipment owner’s larger tax picture
• An assessment of the equipment owner’s cash flow requirements

For equipment owners selling at auction, the like-kind exchange (LKE) basics are fairly easy to understand.  However, as a seller of equipment it’s critical to avoid being tempted into conducting an LKE without taking a thoughtful approach.  If you are planning on selling and purchasing equipment under Section 1031, be sure to coordinate with a team of qualified professionals and...