On August 1, 2014, we received a call from the exchange department of a national banking association. She had a client for whom she was facilitating a conventional exchange of real estate. The exchange accountexchange account had been opened on July 21, 2014, and the net proceeds from the sale of the ...
We were contacted by a potential client about doing an Internal Revenue CodeInternal Revenue Code
(IRC) §1031 tax deferred exchangedeferred exchange
. The client needed to acquire, or risk losing, the desired replacement propertyreplacement property
(new property) in Dillon, Colorado. However, the contract with his buyerbuyer
for the sale of his relinquished propertyrelinquished 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 taxpayertaxpayer
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.”
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.
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 exchange1031 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.
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 ...
Accruit 1031 like-kindlike-kind
exchanges drive multi-million dollar benefit for major auto rental licenseelicensee
...
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 MACRSMACRS
life, but the average hold time is just six months. The company’s combined state and federal tax rate is approximately 40%.
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-kindlike-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,...
Which is better for the bottom line, LKEs or no LKEs? Well, that's an obvious one. Okay, which is better, LKEs or Bonus DepreciationBonus 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...
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