Never Pay Capital Gain Taxes Again

Did you ever notice that when you put the words "The" and "IRS" together, it spells "THEIRS?" ~Author Unknown

Taxes: Of life's two certainties, the only one for which you can get an automatic extension. ~Author Unknown

The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing. ~Jean Baptist Colbert

April 15, 2009 is the date when most U.S. taxpayers file tax returns and pay any outstanding taxes owed. Section 1031 of the Internal Revenue Code provides a powerful incentive for taxpayers that invest in real estate – the potential for 100% tax deferral when exchanging one investment property for another like-kind property. But for the deferral opportunity under Section 1031, investors may be surprised to discover that their final tax liability is often much higher than the 15% Federal long term capital gain tax rate. Past depreciation taken on the property is recaptured at sale and taxed at 25%. State taxes must also be added by many into the final tax calculation. Tax on capital gains in a real world transaction may be at rates as high as 20-25%. To analyze your specific situation, and to learn more about deferring capital gain taxes on the sale of real estate held for investment or for use in a trade or business, click here: http://apiexchange.com/index_main.php?id=8&idz=117.

New Colorado Qualified Intermediary Legislation

Recent legislation in Colorado will provide new protections for real estate investors who utilize a qualified intermediary (“QI”) to complete an IRC Section 1031 tax deferred exchange involving property located in the State. HB 09-1254 (the “QI Act”) was passed by the Colorado Legislature on March 25, 2009, and should be signed by Governor Ritter sometime in April of 2009. The new QI Act establishes regulations governing QIs who participate in tax deferred exchanges involving investment property located in Colorado. Click here, Colorado QI Law Article, for more on this subject.

Reverse / Forward Exchange on Same Relinquished Property

CCA 200836024 -  A taxpayer may engage in “reverse” like-kind exchange under Rev. Proc. 2000-37,2002 C.B. 308 and deferred/“forward” like-kind exchange described in Reg §1.1031(k)-1 using the same relinquished property in both exchanges.

Brief Analysis: Neither §1031, the regulations under §1031, nor Rev. Proc. 2000-37 expressly allow the same relinquished property to be used in both a reverse exchange under Rev. Proc. 2000-37 and a deferred exchange. However, nothing in the statute, regulations or revenue procedure prohibits this coupling in the use of the same relinquished property. Also, taxpayers using the revenue procedure are not constrained to exclusively acquire as replacement property only the property parked with the exchange accommodation titleholder. An argument has been made that Taxpayer's transactions violate Congressional intent because (1) there could be up to 360 days between the day on which replacement property is parked with an exchange titleholder at the inception of the reverse exchange and the day the deferred exchange is completed, and (2) Taxpayer is entitled to two separate 45 day identification periods. The argument, therefore, is that the transactions are contrary to the identification and replacement provisions set forth in §1031(a)(3). However, these are not persuasive reasons for denying deferral, especially in view of the fact that there are two exchanges taking place instead of one.  Click on CCA 200836024 to view the full text.

Recent 1031 Exchange Webinar Available.  Listen Now!

This webinar provides fresh information, insightful analysis and, most importantly, shows creative tax saving strategies to take advantage of the best real estate purchase opportunities in decades. This is not “just another §1031 exchange webinar.” New Challenges. New Insights.  New Solutions.

Click here to listen to Asset Preservation's recent March 1031 exchange webinar, Profitable Exchange Strategies for 2009 and QI Due Diligence.

Recent 2009 American Recovery and Reinvestment Act
50% Bonus Depreciation Extended 1/1/2009 - 1/1/2010 

Great news for taxpayers who are embarking on a new construction project or are adding leasehold improvements in 2009 - the American Recovery and Reinvestment Act of 2009 was officially signed into law, and with it, 50% bonus depreciation has been extended until January 1, 2010. The extension is retroactive to January 1, 2009.

The bonus depreciation is an extension of the 2008 Economic Stimulus Act that allows taxpayers to qualify for 50 percent first-year bonus depreciation on certain types of property for the current tax year. As it relates to any building construction expenditures, the majority of these benefits can only be identified through the use of a cost segregation study. By learning how the latest tax rules work, building owners and tenants in the process of construction can significantly decrease their tax payments.

If you would like additional information about Bonus Depreciation and Cost Segregation, please register for our upcoming webinar at www.costsegregation.com/register or contact Scott Zarret at 626.449.4225 x501.