1031 News

The reinvestment goal of any 1031 tax deferred exchange should be to buy replacement property of equal or greater value and to use up all the exchange proceeds in the closing of the replacement property without getting any cash back.  Receiving cash, sometimes called boot, won’t generally terminate the like-kind exchange, however, it will likely trigger a taxable event for the taxpayer, and should be avoided...

Because we live in such a rapidly changing business environment, I find that people enjoy input and feedback from other business owners on matters of tax and finance. What works and why? What ideas and strategies am I missing? Is there a reason other business owners are adopting certain strategies that I have not considered? Should I consider them now?

The following explores feedback and input from our ongoing national discussions with clients, prospects, political leaders, industry associations, and others. Some, all, or none may be relevant to your business and cash model, but given that the one certainty in today’s business environment is continued uncertainty, the following will provide food for thought as the tax and finance landscape continues to ebb and flow.

1031 Exchanges as a Source of Business Cash

If you own a business and if, as part of that business, you buy equipment that you later sell to purchase new/replacement equipment, you have income tax exposure that averages 40% on those sales proceeds. If you are sending that money to the...

What is Bonus Depreciation?

While not strictly limited to business use equipment, bonus depreciation allows buyers of qualifying property immediate and expanded depreciation expensing.  This “bonus” is above typical depreciation allowances and is available in the year the equipment is placed in service.  Bonus depreciation was last available in 2014 and explained within the Internal Revenue Service’s (IRS) Publication 946 – How to Depreciate Property:

You can take a special depreciation allowance to recover part of the cost of qualified property (defined next), placed in service during the tax year. The allowance applies only for the first year you place the property in service. For qualified property placed in service in 2014, you can take an additional 50% special allowance....

Companies across America utilize 1031 like-kind exchanges (LKEs) and like-kind exchange programs to generate cash benefits that fuel their growth and help finance new equipment purchases. Last year alone, our clients enjoyed over $5 billion in cash flow benefits with which they purchased new equipment. Whether you’re selling a single piece of equipment or hundreds, the cash benefits of LKEs can be a game-changer for your business.

Based on a tax law in effect since 1921, IRC Section 1031, like-kind exchanges are the original economic stimulus plan. They allow for a business to sell its depreciated assets and equipment without recognizing taxes on the realized gains, as long as those gains are reinvested in assets of like-kind. This is an incredible benefit as it allows for the business to reinvest those dollars into replacement equipment purchases...