Local News & Opinion

Ref.: Civic Events

Ref.: Arts & Education Events

Ref.: Public Service Notices

Travel

01.13 Hawaii, the Unique State

Books, Films, Arts & Education

01.24 Can Apple “Rescue” US Education? (Graphics)

01.23 What You (Really) Need to Know

01.22 How to Forecast Weather Infographic w/Simple Explanations

Letters

Ref. : Letters to the editor

Health Care & Environment

02.10 LET’S REMAKE THE WAY WE MAKE THINGS

02.09 Obama shouldn’t compromise on birth control with GOP, religious leaders or an unpopular Congress - video

02.09 Cancer rates triple among New York police officers who responded to 9/11

02.08 The seed emergency: The threat to food and democracy

02.07 Bill Gates backs climate scientists lobbying for large-scale geoengineering

02.04 Your Day at the Beach Could Soon Lead to a Night at the Hospital

02.03 Obama Won't Touch Climate With a 10-Foot Pole

02.03 Komen reverses decision to cut Planned Parenthood funding

02.03 Reforming EU Deep-Sea Fisheries Management

02.02 Obama’s Support for Natural Gas Drilling "A Painful Moment" for Communities Exposed to Fracking- video

02.02 By defunding Planned Parenthood, the Susan G Komen Foundation betrays women

02.02 Ohio Tries to Escape Fate as a Dumping Ground for Fracking Fluid

01.31 Eleanor Smeal dissects Obama vs. Catholic Church controversy over birth control coverage - video

01.30 Report: Small planes still pour lead into skies

01.30 Scientists Call on Obama Administration to Use Science as Guide for Arctic

01.28 Universal health care proposal stalls in California Senate

01.27 Apple, Electronics and Environmental Ills

01.25 Solar Cheaper Than Diesel Making India’s Mittal Believer: Energy

01.24 Sounding an Alarm on Birds and Mercury

01.24 Why Don’t We Have Abundant Solar Power? Blame Financing, and Industry, not Science

01.22 The Money Traps in U.S. Health Care

01.22 Looking Inside the Twinkie

Ref. Dollars for Doctors - How Industry Money Reaches Physicians

Ref. 2010 Comparative Price Report Medical and Hospital Fees by Country - Graphics

Ref. Health at a Glance 2011 - OECD Indicators

Ref. : Why is Healthcare Absurdly Expensive in USA (Part 2) [Graphics] (Part 1 is here)

Video Health Care Systems in Less Corrupt Countries

“News” Media

02.07 Did Obama make the economy worse? Not according to most statistics

02.03 Media Watch: CNN's Erin Burnett regurgitates right-wing talking points to scare retired people - video

02.02 ABC's Iran Propaganda

02.02 The Ongoing “Foxification” of the Wall Street Journal

01.30 While temperatures rise, denialists reach lower

01.29 Fox News psychiatrist: Newt Gingrich's affairs 'mean he might make a strong president'

01.22 ‘Shocking victory’: With SOPA shelved, Markos Moulitsas on a way forward for Internet policy - video

Daily The Daily Howler

Justice Matters

02.05 Why the AGs Must Not Settle: Robo-signing Is Just the Tip of the Iceberg

02.04 THE CAGING OF AMERICA

02.03 Senate Votes To Ban Its Members From Insider Trading... Kind Of

01.31 Senate clears way for vote on insider-trading ban

01.25 Why all the robo-signing? Shedding light on the shadow banking system

01.25 In Iraq, Haditha case is reminder of justice denied

01.22 Still Not Clear on SOPA & PIPA? Infographic w/Simple Explanations

US Politics, Policy & Culture

02.10 The Cancer in Occupy

02.10 How Opus Dei Influenced Rick Santorum

02.10 People Are Not Leaving the Labor Force

02.09 Obama, Explained

02.09 OPED: The White Underclass

02.09 EDITORIAL: A Terrible Transportation Bill

02.09 THE OBAMA MEMOS

02.06 Are Conservatives More Fearful Than Liberals?

02.04 Soaking the Poor, State by State

02.04 Reddit Co-Founder Alexis Ohanian's Rosy Outlook On The Future of Politics

02.03 SUPERBOWL XLVI: Are You Ready for Some Football???

02.03 Buffett rules: Sheldon Whitehouse introduces the Paying a Fair Share Act - video

02.02 Secrecy Shrouds ‘Super PAC’ Funds in Latest Filings

02.02 Steve Israel condemns GOP Keystone XL ‘stunt,’ cheers Democratic Drive to 25 to reclaim the House - video

02.01 Rich Patrons Are Major Source of Romney’s Cash

01.31 How Newt Gingrich Crippled Congress

01.30 The Truth About the Conservative Mind: Why Reactionaries from Edmund Burke to Sarah Palin Have Fought Real Liberty

01.30 Corporate Rule Is Not Inevitable

01.30 Clashes in Oakland: 400 Arrests, Tear Gas, Flash-Bang Grenades

01.30 A European look at the US primaries - video

01.29 Obama’s Faux Populism Sounds Like Bill Clinton

01.25 Inside Romney’s Tax Returns: A Reading Guide

01.24 ILLUSIONS: Being Led Down the Primrose Path...???

01.24 Science Bulletins: Whales Give Dolphins a Lift - video

01.24 Buffett On Why Romney Should Pay Higher Taxes: He’s Just ‘Shoving Around Money,’ Not ‘Straining His Back’

01.24 THE OBAMA MEMOS

01.22 Three Takeaways From South Carolina

01.21 Why Is There So Much God in Our Politics? The Religious Right's Theocratic Plan for the 2012 Election

High Crimes?

Economics, Gov't. & Business

02.10 This is no bailout for Main Street America

02.10 Why the Foreclosure Deal May Not Be So Hot After All

02.10 Matt Taibbi assesses the $26 billion settlement designed to aid victims of foreclosure fraud - video

02.10 Foreclosure Deal to Spur U.S. Home Seizures

02.08 Banks Paying Homeowners to Avoid Foreclosures

02.07 App Stores Create 500,000 U.S. Jobs

02.07 The Payroll Tax Fight

02.07 Obama super PAC decision: President blesses fundraising for Priorities USA Action

02.06 How Privatizing Government Shovels Cash to Parasitic Corporations and Undermines Democracy

02.05 We’re More Unequal Than You Think – Graphic: Unequal rise in income

02.03 PRIVATE INEQUITY

02.02 The New American Divide

02.02 American Airlines proposes to end all four pension plans

02.01 Economics 101

01.30 New Strategy, Old Pentagon Budget

01.30 Where Did All the Workers Go? 60 Years of Economic Change in 1 Graph

01.29 The Apple Boycott: People Are Spouting Nonsense about Chinese Manufacturing

01.29 Made in the World

01.28 Matt Taibbi ponders whether Obama’s embrace of populist rhetoric is already impacting Wall Street - video

01.28 Sugar daddy Adelson could save $500 million in taxes if his boy Gingrich wins - video

01.28 How Swedes and Norwegians broke the power of the ‘1 percent’

01.27 Unemployment in Spain Rises to 22.9%

01.27 Chinese Company Continues Plan To Replace Workforce With 500,000 Robots

01.27 Details Emerge of New Financial Fraud Unit

01.27 Not all jobs are equal

01.27 The Shift from Manufacturing to Service Economy - Graphic

01.25 Billionaires Occupy Davos as 0.01% Bemoan Inequality

01.24 Germany has the economic strengths America once boasted

01.23 State Capitalism: The visible hand

01.22 How Big Money Bought Our Democracy, Corrupted Both Parties, and Set Us Up for Another Financial Crisis - video

01.22 How U.S. lost out on Apple's iPhone work

International

02.03 What the Occupy movement must learn from Sundance

02.02 US plans to halt Afghan combat role early surprise Kabul

01.31 TABLE TALK

01.30 With its deadly drones, the US is fighting a coward's war

01.30 UN panel aims for 'a future worth choosing'

01.26 Iran is ready to return to nuclear talks

01.24 Reagan’s Hand in Guatemala’s Genocide

We are a non-profit Internet-only newspaper publication founded in 1973. Your donation is essential to our survival.

You can also mail a check to:

Baltimore News Network, Inc.
P.O. Box 42581
Baltimore, MD 21284-2581

Why '1031 Exchanges' Interest Investors

CONSUMER INFORMATION:

Why '1031 Exchanges' Interest Investors

by Benjamin Hoffman

Since 2002 IRS clarifications, 1031 exchanges can now be used by tenants-in-common (TIC)

With the recent run-up in real estate prices, investors are looking for ways to defer capital gains taxes. Unlike a primary residence, where a $250,000 exclusion amount may apply if certain criteria are met, the individual investor is left with few alternatives to avoid taxation. However, Section 1031 of the IRS Code may provide just what the individual investor is looking for.

Because of 2002 IRS clarifications, the 1031 exchange has become a very popular option for many real estate investors. A 1031 exchange (named after Section 1031 of the IRS code) is not a new idea. It was created in 1921 in order to allow for a reciprocal transfer of certain types of property. In the past, abiding by the very strict requirements of the 1031 caused investors to choose other options when selling their real estate. Now, with Tenants-in-Common (TIC) ownership, the popularity of the 1031 has been increasing significantly. Since 2001, the amount of money invested in TICs has roughly doubled each year. It is believed that TICs will reach more than $5 billion in 2006.

Tenant-in Common is a form of ownership whereby two or more individuals own a partial share of a whole piece of property. Each co-owner receives his or her portion of net income, tax benefits and appreciation. TIC investments are created by various sponsors who acquire the property and package it for sale to multiple investors who will each own a fractional interest. The typical TIC offering is a large institutional property such as an office building or luxury apartment complex.

A 1031 exchange is usually a three-way delayed exchange in which an intermediary is used to facilitate the transaction. There are four basic steps:

The seller arranges for the sale of property and includes exchange language in the contract.
At closing, sales proceeds go to a Qualified Intermediary for a 1031 exchange.
The seller must identify potential exchange properties within 45 days of the closing.
The seller must complete the 1031 exchange within 180 days of closing.

A successful exchange can result in the taxpayer being able to utilize 100% of the proceeds from the sale of property to purchase a new property, thus deferring capital gains. By doing this, real estate owners can accomplish a number of objectives: diversification, improved cash flow, greater leverage, geographic relocation, or property consolidation.

The power behind the TIC

Heirs receive a stepped-up basis on the TIC investment, potentially eliminating capital gains taxes altogether.

One driving force behind the increase in TICs is the ability to defer taxes on the gains from the sale of certain types of property, while taking advantage of the recent real estate boom in highly desirable areas. Another driving force is TIC investors typically become owners of high quality commercial or industrial property. Thus, the owner becomes a passive owner, which means no 2:00 am phone calls that the toilet is clogged or the heater broke. A third benefit is TIC investors can receive monthly income from their investment while still having the potential for appreciation of the property. Lastly, heirs receive a stepped-up basis on the TIC investment, potentially eliminating capital gains taxes altogether.

There are risks involved

While a TIC investment provides many benefits, you should also be aware of the risks and limitations of such an investment. TIC interests are not freely transferable, and there is no secondary market for these interests. Cash distributions and potential property appreciation are not guaranteed. Also, investors in a TIC are subject to the typical risks of real estate ownership such as economic influences, occupancy rates, and tenant risk.

Some Dos and Don’ts

Do advanced planning for the exchange and talk to your accountant, attorney, and financial advisor prior to selling a property.
Do not miss your 45-day identification deadline as this will disqualify the entire exchange, and expose you to possible tax liabilities from the sale.
Do keep in mind that you must receive only “like-kind” replacement property in the U.S. (i.e., you can exchange any real estate investment for any other type of real estate investment; for example, vacant land can be exchanged for an office property; an apartment can be exchanged for a retail property), must use all proceeds from the sold property for purchasing the replacement, and make sure the debt on the replacement property is equal to or greater than that on the relinquished property.
Do not try doing a 1031 exchange yourself using your CPA or attorney to hold title or funds. IRS regulations require a Qualified Intermediary to properly complete an exchange.

As you can see, there are some wonderful benefits to the 1031 exchange but qualifying and following every rule can be tough. You should consult with legal experts knowledgeable on these transactions before deciding if a 1031 is right for you.

Benjamin Hoffman is Vice President of Investments for H&R Block Financial Advisors located in the firm’s Timonium, Maryland office. He may be reached at 410-308-6108 and bhoffman@hrblock.com.

Copyright © 2006 The Baltimore Chronicle. All rights reserved.

Republication or redistribution of Baltimore Chronicle content is expressly prohibited without their prior written consent.

This story was published on June 21, 2006.

Public Service Ads: