All Forum Posts by: Celia Moore

The answer is “yes” if the dwelling meets the qualifications set forth in Revenue Procedure 2008-16. Effective March 10, 2008. This revenue procedure clarified what was once considered a muddled area of 1031 exchanges. The qualifications are the following:

Relinquished property

1. The holding period for the vacation home is at least 24 months immediately before the exchange*;
2. For each of the two-12-month periods, the vacation home is rented to another person at a fair rental for 14 days or more; and
3. The homeowner limits his use of the vacation home to not more than 14 days or 10% of the number of days during the 12-month period that the vacation home is rented at a fair rental value.

* For this purpose, the first 12-month period immediately preceding the exchange ends on the day before the exchange takes place (and begins 12 months prior to that day) and the second 12-month period ends on the day before the first 12-month period begins (and begins 12 months prior to that day).

Replacement property

1. The holding period following the exchange is at least 24 months*;
2. For each of the two-12-month periods, the vacation home is rented to another person at a fair rental for 14 days or more; and
3. The homeowner limits his use of the vacation home to not more than 14 days or 10% of the number of days during the 12-month period that the vacation home is rented at a fair rental value.

* For this purpose, the first 12-month period immediately after the exchange begins on the day after the exchange takes place and the second 12-month period begins on the day after the first 12-month period ends.

Here’s an example to analyze this revenue procedure. Let’s assume that taxpayer has owned a beach home since July 4, 2002. The taxpayer and his family use the beach home every year from July 4, until August 3 (30 days a year.) The remainder of the year the taxpayer has the house available for rent. Now, the taxpayer has negotiated the sale of his beach home so that ownership of the house transfers on May 5, 2008. Under the Revenue Procedure, the IRS will examine two 12-month periods: (1) May 5,2006 through May 4, 2007 and (2) May 5, 2007 through May 4, 2008. To qualify for the 1031 exchange, the taxpayer was required to limit his use of the beach house to either 14 days (which he did not) or 10% of the rented days. So, the IRS will need to find that the taxpayer actually rented the house at a fair market value for 300 days each during the two 12 month periods for the vacation home to qualify for a 1031 exchange.

As always, your CPA and/or attorney can advise you on this tax issue.

For more information head online now to 1031exchange.com! 

Oregon recently became the first state in the nation to enact statewide rent control and restrictions on tenant evictions. Senate Bill 608 was signed into law by Gov. Kate Brown on February 28, 2019, taking effect immediately.

Senate Bill 608 sets the maximum that a landlord may increase a tenant’s rent at 7% plus consumer price index (CPI) during a 12-month period. This unprecedented statewide cap applies to month-to-month and fixed-term tenancies, with exceptions for new construction and regulated affordable housing. At the beginning of a new tenancy a landlord may re-set to market rent.

In addition to restrictions on a landlord’s ability to increase rent, Senate Bill 608 restricts a Landlord’s ability to terminate both month-to-month and fixed-term tenancies. After the first 12 months of occupancy a landlord may only terminate a month-to-month tenancy for cause, either tenant-based or landlord-based. If terminating a tenancy for a landlord-based cause, the landlord must give a tenant 90 days’ notice and provide relocation assistance in the amount equal to one month’s rent. Landlords with four or fewer units are exempt from paying relocation expenses. SB 608 further provides that a fixed term tenancy automatically converts to a month-to-month tenancy if not renewed or terminated.

Supporters of the bill argue the new restrictions will provide relief to tenants facing rising rents and limit displacement from landlord evictions in what has been declared a statewide “housing crisis.” However, research on rent control has shown that where legislation works against market forces by setting a cap on what a landlord may charge the impacted communities tend to see stagnation in the market. Where rent control has been enacted, tenants are encouraged to stay in their unit even if their housing needs have changed in an effort to secure their below market rates and markets have seen a reduction in the availability of rental units.

The government’s efforts to preserve housing affordability distort the economic incentives that are otherwise present in the rental market. Landlords are disincentivized from maintenance and repairs that may otherwise be a priority. Individual ownership of rental properties may decrease due to added costs associated with the restrictive parameters of the new law. In the aftermath of SB 608 Oregon could see property owners moving their investments to alternative markets as the benefits of owning property in state are now outweighed by the drawbacks.

Investors: What is your new game plan?

@Paul Blekou tools like the 1031 Exchange and Self-Directed IRA are a good place to start! Give us a call today at Equity Advantage and we will help you out!

@Account Closed Photoshop should be able to export high quality photos! Especially if they are coming from a Canon camera. Are you having to minimize the files at all when transferring back to your phone? Otherwise you should be good to go, we use Photoshop and Premiere Pro for all of our high quality content. 

For fun posts check out canva.com! They have a great variety of templates and editing features on there. Basic accounts are free.

Good luck! 

@Bill Exeter that is true, the last extension caused quite the confusion... thank you for the info. 

One can be hopeful though! 

Earlier this year, the IRS issued guidance extending the time periods for individuals currently in a 1031 Exchange due to the Coronavirus pandemic. IRS Notice 2020-23 provides that those performing time-sensitive actions listed in Revenue Procedure 2018-58 due to be performed on or after April 1 and before July 15, 2020 is an Affected Taxpayer.

It appears Exchangors whose 45-day identification period or 180-day exchange period falls between April 1, 2020 and July 15,2020 will have until July 15 to identify and/or purchase a replacement property for 1031 exchanges.

July 15th has now passed. 

What do you all think... any chance we get another extension?

@Jaysen Medhurst hearing all of that... I sure hope not! Eliminating or limiting like-kind exchanges in the best of times would have a negative economic impact, increasing the cost of capital, slowing the rate of investment, increasing asset holding periods, and reducing real estate transactional activity. In the face of the current COVID-19 pandemic, recession and economic upheaval, the contractionary impact on the U.S. economy and real estate industry would be severe.

Like you stated, the 1031 Exchange has made it out of this alive before, but it is still a scary threat to once again have over our heads. For all the reasons you have listed and more, I pray it makes it through another round of eliminations. 

In our almost 30 years of time in the 1031 Exchange business, we have had at least a half dozen serious attacks on Section 1031’s existence. Although the 1031 Exchange has been in existence for almost 100 Years, it is once again in jeopardy! There is a serious possibility of a major change in power in the federal government after this Fall's election, and with this change we are hearing proposals that could almost double Capital Gain’s Tax Rates, eliminate the Step-Up in Basis and remove Section 1031 Exchange…

FEA Leadership and GAC are very aware the presumptive Democrat Presidential nominee, Joe Biden, has a tax plan that will eliminate many “tax loopholes.” Section 1031 is targeted to be eliminated as an unnecessary “tax loophole” in the Biden Administration’s tax proposal. If this were to happen, the 1031 exchange and the corresponding industry would cease to exist! As further information becomes available we will be distributing it, but in the meantime please be alert to possible changes and do your best to inform clients and fellow professionals of the possible upcoming changes.

Every few years we hear how an election is potentially the “most important ever” and guess what? This time it may actually be true. This is the time to make a difference!

To read more head online to 1031.org or 1031taxreform.com/FEA

Best of health to all!

Since 1921, like-kind exchanges have stimulated capital investment in the United States by allowing funds to be fully reinvested in the enterprise. These investments benefit not only the taxpayers making the like-kind exchanges, but also generate jobs and taxable revenue for unrelated businesses upstream and downstream from the exchange transaction, such as real estate brokers, title and property insurers, escrow / settlement agents, lenders, appraisers, surveyors, attorneys, inspectors, contractors, building supply vendors and more. 

Eliminating or limiting like-kind exchanges in the best of times would have a negative economic impact, increasing the cost of capital, slowing the rate of investment, increasing asset holding periods, and reducing real estate transactional activity. In the face of the current COVID-19 pandemic, recession and economic upheaval, the contractionary impact on the U.S. economy and real estate industry would be severe...