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By SHARON ROBINSON, for 1031illinois.com 9/7/2007

Find and work with a good Realtor who can help you locate properties that work for you.Many taxpayers, including seniors who have already used the one-time over-55 $125,000 exclusion, do not realize they are eligible to sell their primary home again - and do it every two years - under the Taxpayer Relief Act of 1997. And, if you are buying rental property with the intention of managing the building yourself, you hopefully have some experience under your belt. The taxpayer may designate more than one property (generally up to three, or more than three if the total value of the new properties designated is less than twice the value of the property sold). As a result, a number of commercial real estate companies are now offering TIC interests to exchangors in order for them to complete their like-kind exchanges. "Tax preference items" are preferences existing in the Code to greatly reduce or eliminate regular income taxation. Make sure that you find an attorney and/or tax advisor who is expert at these transactions to ensure that you do it right. Of course, one can sell the new property as part of another like-kind 1031 exchange and continue to defer their capital gains tax. Reverse exchanges spanning more than 180 days may still qualify for like-kind exchange treatment, just not under the safe harbor provision.x

Where did it go wrong?

I would stick to single family homes and small multi-units (1-5 units). It extends up to the day which is 180 days after the date on which the taxpayer transfers the property relinquished in the exchange, or the due date of the tax return for the year in which the property was relinquished. It is not necessary to have the replacement property identified at this time. For properties that are leased by more than one tenant, such as a shopping center, the expenses that are "passed through" to the tenants are usually prorated among the tenants based on the size (square footage) of the area occupied by each tenant. In a booming market, property may be overvalued and hence market value appraisals may exceed intrinsic or fundamental values.x While tax-deferred exchanges can provide incredible opportunities for real estate investors, there are specific rules that must be followed. Intangible drilling and development costs in the case of oil and gas wells and geothermal wells Notwithstanding subsection (a), and except as provided in subsection (i), regulations shall be prescribed by the Secretary under this subtitle corresponding to the regulations which granted the option to deduct as expenses intangible drilling and development costs in the case of oil and gas wells and which were recognized and approved by the Congress in House Concurrent Resolution 50, Seventy-ninth Congress. The exchange works the same way for oil and gas as for real estate. In an exchange, all proceeds from the sale of property are available to purchase other property.

MLS: illinois 1031 exchange properties

But it is stated that the real property in the United States and real property outside the United States are not like-kind properties. Ww have to understand the tax consequences of engaging in a Starker exchange, also known as a 1031 exchange.Investors seeking less actively managed real estate opportunities often elect to invest in Triple Net Leased Properties (NNN) or Tenancy in Common Investments (also called 1031 TICs).Mistakenly identifying condominium A, when condominium B was intended, does not permit a change in identification after the 45 day Identification Period expires. Section 1031 of the Internal Revenue Code, 26 1031, provides: No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment. But this is typically rare when dealing with real estate.

Questions for your QA

The TIC type commercial offering helps solve these problems. This Tax Act specifically exempted Intangible Drilling Cost as a Tax Preference Item. It is possible to enter a deferred exchange where your replacement property has not been built yet. In most cases your boss won't comprehend the need for your absence, so it's worth considering hiring a property manager when you're buying rental property. The great advantages are the large number of properties available and both the size of the TIC interest and the date for closing are very flexible. "Alternative Minimum Taxable Income" generally consists of adjusted gross income, minus allowable Alternative Minimum Tax itemized deduction, plus the sum of tax preference items and adjustments. This is a tax deferred exchange; it allows you to sell one rental property and buy another one without paying any taxes on the sell of that property. These are documents that the investor or his/her attorney completes, along with a basic exchange agreement with the intermediary. Boot is an old English term meaning Something given in addition to.

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