Irs 170 exchange

[Ash Patel]

I received an offer on a commercial property today.  The buyer is using a company called welfont group to do a 170 exchange.   I searched through BP and didn't find anything about 170s. 

I would appreciate any insight on this.   Specifically:

Can I get the funds at closing or do I have to wait?

Can I 1031 the proceeds just like any other?

What are my tax implications compared to a normal cap gains sale?

If no one chimes in, I will run it by my cpa and report back.  

We are pleased to bring you an offer for the property located at 1014 State Route 125 with net proceeds estimated at $615,372.

I have attached the offer with the LOI included. Because our buyer is a nonprofit entity, and this property is ideal for a 170 Exchange*, our clients offer is very strong (valued above list price). This offer provides cash at closing with the balance of the proceeds guaranteed by State and Federal Governments.

For a more detailed explanation of a 170 Exchange please review this video: (Understanding a Sect. 170 Exchange) and then pass it along to your client with the offer. The video will be invaluable to them in understanding the 170 Exchange and will be easy for them to share with their CPA, etc., if so desired.

I look forward to reviewing the offer with you in detail and answering any questions you or your client may have.

Please call me at your earliest convenience or email me with a good time for me to call you.

*Our clients have closed on over $150 million worth of transactions using a Sect. 170 Exchange. More than 60 properties in the last two years alone.

[Laurence T.]

Welfont did not make up the Section 170 "Bargain Sale". It has been part of the tax code since 1917. All Welfont does is bring the buyer (a 3rd party non-profit organization) to the table and help facilitate the process. The property must be appraised by a 3rd party licensed appraiser. The seller gets the appraised value amount (minus the cash amount the buyer pays) as a tax deduction (which can be rolled over up to an additional 5 years). If the seller(s) makes enough income to utilize most or all of the tax deduction, they can often net more from the tax deduction, combined with whatever amount of cash the buyer pays at closing, than they would from a traditional sale to a regular all-cash buyer. I think the "ideal" seller who benefits the most from this type of transaction is one who has a low cost basis in the property and low mortgage liability, and anticipates a substantial tax liability from capital gains and/or other income.