This 1031 eligible commercial property located in Denton, Texas is available for the 1031 client looking to acquire healthcare replacement property. Construction of the 5,706 square foot building was completed in December, 2011. The triple net lease is occupied by Cardiovascular Specialists under a ten year lease.
Andy Gustafson
Nevada, Oregon, Virginia and Washington 1031 Exchange State Laws
Eight states have legislated 1031 exchange laws that require the Qualified Intermediary (QI) accommodating the tax deferred exchange to follow or face criminal or civil penalties. The laws serve to protect taxpayer exchange proceeds, establish QI safeguards and procedures to alert the taxpayer of QI changes in ownership. Sanctioned by the Treasury Department and enforced by the Internal Revenue Service, the 1031 exchange allows taxpayers both domestic and foreign to defer federal and state capital gains and recaptured depreciation taxes when property held for the productive use in a business or investment is exchanged solely, for property held for productive use in a business or investment.
California, Colorado, Idaho and Maine 1031 Exchange State Laws
1031 exchange laws have been passed in eight states requiring Qualified Intermediaries to follow specific procedures to protect the exchange proceeds of their residents engaged in a 1031 tax deferred exchange. A 1031 exchange is a Section of the Treasury and IRS Regulations that provides taxpayers a tax deferral on the federal capital gains and recaptured depreciation tax when real or personal property held for investment or in a business is sold and replaced with like-kind property. A Qualified Intermediary (QI) is the third party who accommodates the exchange, providing documentation in accordance with the Treasury and IRS requirements and holding the exchange proceeds. States also recognize the federal statute allowing the taxpayer to defer state capital gains taxes if applicable.
1031 Tax Consequences of Selling Business Assets
When selling a business, consideration of the tax consequences, including a 1031 exchange is often not at the top of the list. Following a meeting with your CFO or CPA, the federal, state and recaptured depreciation tax obligation is determined and now included in the dizzying array of outcomes as is the decision of whether or not to replace the assets. By replacing all or some of the assets, the federal, state and recaptured depreciation taxes can be deferred in a 1031 exchange. Rather than paying the tax, those dollars can be used towards as an interest free loan towards acquiring replacement property. The tax obligation does not go away, but is postponed; delayed until time the newly acquired property is sold. Another 1031 exchange is possible, or should the assets be inherited, the basis is stepped up to the heirs.
1031 Exchange Timeline Requirements
A 1031 exchange timeline begins with your CPA suggesting the tax deferral strategy. You are in the process of selling and replacing real estate, whether that is land, a vacation rental or commercial property or aircraft used in business, artwork, vintage car, livestock or classic musical instrument and now need to research how to initiate and what is a 1031 exchange. What do you do? What are the timelines, what haven’t you done, is there time? As long as you have not closed and received the net equity from the sale, there is time. I promise as an Eagle Scout earned years ago when Richard M. Nixon was President.
1031 Exchange Deferred Improvement
A deferred improvement exchange is when the exchangor uses the exchange proceeds or funds towards making improvements to the replacement property following the first leg event or sale of the relinquished property. The only difference between a deferred improvement and a reverse exchange is the sequence of events. In either 1031 exchange, the improvements must be made while an Exchange Accommodator Titleholder (EAT) is on title. A Qualified Exchange Accommodation Agreement (QEAA) is entered into by the exchangor, EAT and the Member of the EAT qualifying for the safe harbor protection provided by Revenue Procedure 2000-37.