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Ten 1031 investment exchange references

By DIANNE SHELTON, for 1031propertyinvestment.com 9/5/2007

xx Bondable leases are typically used in so-called "credit tenant lease" deals, where the main driver of value is not so much the real estate, but the uninterrupted cash flow from the usually investment-grade rated "credit" tenant. (See Section 469(c)(3) of the Tax Code). The one-time, over-55 exemption was becoming more of a one-time problem. "Tax preference items" are preferences existing in the Code to greatly reduce or eliminate regular income taxation.

What to ignore

In a booming market, property may be overvalued and hence market value appraisals may exceed intrinsic or fundamental values. For example, if you deducted $25,000 for depreciation over the years that you owned the property, you owe tax on the difference between the sale price of $150,000 and $75,000 ($100,000 purchase price minus $25,000 depreciation).All this tax may just motivate you to hold on to your property. This study evaluates the investment prospects of value stocks in the real estate investment trust (REIT) market. Often, reverse exchanges become a necessity at the last minute when a planned exchange fails. You are getting ready to sell a piece of investment real estate. However, due to many questions and comments on the issue, in 2000 the IRS issued Revenue Procedure 2000-37 and provided safe harbor requirements that allow reverse exchanges to be treated as like-kind exchanges.

Additional points of consideration

Simply put, the investor needs to make sure they are using the equity to leverage the best return on their investment. The tax law is not clear with regards to relinquishing a vacation home in a 1031 exchange. The parties generally want and expect property value fluctuations to be borne by the taxpayer rather than the AP. If proceeds from the sale are used to service non-transaction costs at closing, the result is the same as if the taxpayer had received cash from the exchange, and then used the cash to pay these costs. The lessee is a real estate ownership and management company with an established history of commercial real estate experience.