All Forum Posts by: Marcus Welson

Thank you Lauren. 

That does help. I'll have to try and find a CPA that will address the deadline. I'm not sure why the one's I've spoken with have shied away from it. 

Thank you. 

Hello everyone. 

Just finished a property sale. I'm trying to confirm the final replacement property identification deadline because the IRS issued a Disaster Notice that may extend my 45 day deadline.

My qualified intermediary says they will not confirm the IRS notice applies or whether the 45 day date they gave me is overridden by the notice. They directed me to consult with a CPA or tax planner. After reaching out to two separate CPA's they advised me they do not answer 1031 questions and the intermediary should confirm the correct deadline date.

Can anyone confirm whether the qualified intermediary should provide the confirmation of the date pursuant to the IRS notice or provide a CPA who does phone or zoom consultations and works with 1031's/IRS Notices?

If needed for reference, the questions I have for the CPA are posted at:
https://www.biggerpockets.com/forums/51/topics/1221080-1031-...

Hello everyone.

I'm trying to breakdown how an IRS 1031 extension notice applies to a 1031 exchange. All help is greatly appreciated. 

Facts

- Property Sale/Closing date: October 21, 2024
- Property Location: sold in Miami Dade County, FL
- 1031 potential replacement property identification deadline: 45 day identification deadline of December 5, 2024.
- Seller's residence county: Orange County, FL

IRS Notice for reference:
FL-2024-10 - Hurricane Milton IRS extension
https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-milton-various-deadlines-postponed-to-may-1-2025-in-all-of-florida

My Assumptions:

A. Orange County, FL is a covered disaster area listed in the above notice. 

B. I am an affected taxpayer as the property sold was located in Miami-Dade County and I a reside in Orange County and both counties are named, covered disaster areas. 

C. On the October 21, 2024 sale, the 1031 was started with a Qualified Intermediary that same day, so the transaction is a  transaction governed by Rev. Proc. 2000-37 and therefore qualifies for extension under Rev. Proc. 2018-58 -SECTION 17.02(2)(a) [ see analysis section below for link and text ].

D. Based on these assumptions and the IRS notice's text that "The IRS also gives affected taxpayers until May 1, 2025, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2018-58, 2018-50 IRB 990 (Dec. 10, 2018), that are due to be performed on or after Oct. 5, 2024, and before May 1, 2025, are granted additional time to file through May 1, 2025." the 45 day identification deadline is extended because Rev. Proc. 2018-58 extends the deadline in cases of federally declared emergencies and the exchange is a transaction governed by Rev. Proc. 2000-37. 

Further analysis notes:

Rev. Proc. 2018-58 -SECTION 17. SPECIAL RULES FOR SECTION 1031 LIKE-KIND EXCHANGE TRANSACTIONS, page 135 states:

". 01 Taxpayers are provided the relief described in this section if an IRS News Release or other guidance provides relief for acts listed in this revenue procedure (unless the news release or other guidance specifies otherwise).

.02

(1) The last day of a 45-day identification period set forth in § 1.1031(k)-1(b)(2)(i) of the Income Tax Regulations, the last day of a 180-day exchange period set forth in § 1.1031(k)-1(b)(2)(ii), and the last day of a period set forth in section 4.02(3) through (6) of Rev. Proc. 2000-37, 2000-2 C.B. 308, modified by Rev. Proc. 2004-51, 2004-2 C.B. 294, that fall on or after the date of a federally declared disaster, are postponed by 120 days or to the last day of the general disaster extension period authorized by an IRS News Release or other guidance announcing tax relief for victims of the specific federally declared disaster, whichever is later. However, in no event may a postponement period extend beyond: (a) the due date (including extensions) of the taxpayer’s tax return for the year of the transfer (See § 1.1031(k)-1(b)(2)(ii)); or (b) one year (See section 7508A(a)).

(2) A taxpayer who is a transferor qualifies for a postponement under this
section only if--
(a) The relinquished property was transferred on or before the date
of the federally declared disaster, or in a transaction governed by Rev. Proc. 2000-37, modified by Rev. Proc. 2004-51, qualified indicia of ownership were transferred to the the earlier of a total of 180 – days or the date upon which the exchanger has to file its tax return for the year in which the exchange was initiated, to complete the purchase of the replacement properties."

Questions:

1. Based on the above is my understanding correct and the 45 day identification period and 180 replacement property purchase period (which includes the 45 days) both extended?

2. The deadline is extended until May 1, 2025 by the IRS Emergency Disaster Relief Notice (This date is also "the last day of the general disaster extension period authorized by an IRS News Release or other guidance announcing tax relief for victims of the specific federally declared disaster" Rev. Proc. 2018-58 -SECTION 17.02(1). However, the actual deadline would be April 15, 2025 my individual tax payer filing deadline per Rev. Proc. 2018-58 -SECTION 17.02(1)'s provision that "However, in no event may a postponement period extend beyond: (a) the due date (including extensions) of the taxpayer’s tax return for the year of the transfer."

3. I can extend the April 15, 2025 deadline by seeking an extension of my individual return as per Rev. Proc. 2018-58 -SECTION 17.02(1)'s provision that "However, in no event may a postponement period extend beyond: (a) the due date (including extensions) of the taxpayer’s tax return for the year of the transfer."

4. Please advise if I have missed anything or anything else you believe is relevant. 

Thank you for your help trying to make sense of the convoluted IRS notice and regulations. 

Hello everyone.

Newbie investor getting ready to sell first property. It appears I'll need a 1031 exchange to offset substantial capital gains. 

The Qualified Intermediaries I am vetting have provided their exchange agreements. I see a few red flags and just want to know if these are typical provisions and I'll be facing a "take it or leave it" scenario with ny intermediary I hire.

Please give me your thoughts, my gut says the QI wants overly broad protection from everything and that shouldn't include things like not verifying instructions are from me or for negligence or misconduct.

Sample Terms

1. Interpleader term that requires the QI to deposit funds with the court in case of disputes or 3rd party claims. I get this but the provision also requires the LLC that holds the property to submit to the local jurisdiction wherever the Qi files. LLC is a WY corp, so this would require waiving WY protections.

2. Exculpation/Limitation on Damages Clause. Again, this would be reasonable if limited to damages by third party, etc. However, it reads as a broad release, even for misconduct or negligence, especially if they were to make a mistake on a wire. "In no event shall Qualified Intermediary be liable or responsible to any person or entity with respect to any action taken or omitted to be taken by it under this Agreement or at the direction of Exchanger. Exchanger and not Qualified Intermediary shall bear any risk of loss while funds are being wired or transmitted to or from the Exchange Account. In any event, Qualified Intermediary's total liability to Exchanger shall be limited to proven direct damages in an amount not greater than the fee payable by Exchanger to Qualified Intermediary."

3. Indemnification clause indemnifies for everything except "material breach of this Agreement or its willful misconduct." This seems overtly narrow. What about sending a wire to the wrong place. Getting hacked and so on. 

4. "Right to Rely on Instructions; Exceptions.
Qualified Intermediary may act in reliance upon any instruction, instrument or signature it reasonably believes to be genuine from Exchanger, its officers, attorneys and other representatives, and Qualified Intermediary may assume that the person giving the instruction, instrument or signature is authorized to do so. To facilitate the flow of information, Qualified Intermediary may also provide information and documentation to third parties whom the Qualified Intermediary reasonably believes to be authorized by Exchanger to receive such matter. Qualified Intermediary shall have no obligation to inquire into the truth or evaluate the merits of any statement or representation contained in any notice, document or other communication reasonably believed to be from Exchanger, its officer, attorneys and other representatives. In connection with its duties, Qualified Intermediary shall be protected for acting or refraining from acting upon any written notice, request, consent, certificate, order, affidavit, letter, facsimile, email or other communication or document furnished to it under this Agreement and to have been signed or sent by Exchanger or any of its officers, attorneys, or other representatives, provided, however, that any instructions relating to disbursements of funds shall be subject to the provisions of Section 3.4 above and the Disbursement Instructions shall be signed by the taxpayer or submitted by the taxpayer online via the Software." This sounds like they have no duty whatsoever to verify information or instructions

Hello everyone. 

I'm trying to confirm my understanding of a less straight forward capital gains scenario than the one-time purchase and sale most deals involve.

Essentially 100% interest in a condo was acquired over time, as each joint tenant passed away, leaving 1 sole tenant who gained full ownership by rights of survivorship.

I've gotten differing opinions from different professionals and am trying to understand the calculation of the basis and the final capital gains  tax that would be due myself so I can spot bad advice and understand deals.

Assumptions:

A condominium
No depreciation has ever been taken by any owner.
No 1031 exchange.
No expenses or improvements. (to keep things simple)
Property was primary residence for Person A from original purchase until 01/2020. The property was then rented from 01/2020 through today's date.

• A condominium was purchased by Person A on 11/1986 for a property value of $52,700.

• On 11/2015, the condo real property was quit claim deeded by Person A to Person B as a joint tenant with rights of survivorship and Person C as a joint tenant with rights of survivorship. The property value on this date was $80,000.

• On 11/17/2020 person A died. The property value on this date was $180,000.

• On 01/2023 person B died. The property value on this date was $240,000.

• Person C is still alive and will be selling the real property today for $290,000 with an expected net profit of $235,000.

Overview of Ownership and Basis Calculation

1. Initial Purchase by Person A (11/1986):
• Purchase Price: $52,700

2. Transfer of Ownership (11/2015):
• Value at Transfer: $80,000
• Ownership Structure:
• Person A: 33.33% (approx. basis $26,667)
• Person B: 33.33%
• Person C: 33.33%

3. Death of Person A (11/2020):
• Fair Market Value at Death: $180,000
• Step-up in Basis for Person C upon death of Person A:
• 33.33% of $180,000 = $60,000
• New Basis for Person C: $26,667 (original basis) + $60,000 (step-up) = $86,667 for 66.66% ownership.

4. Death of Person B (01/2023):
• Fair Market Value at Death: $240,000
• Step-up in Basis for Person C upon death of Person B:
• 33.33% of $240,000 = $80,000
• New Basis for Person C: $86,667 (previous basis) + $80,000 (step-up) = $166,667 for 100% ownership.

5. Sale of Property (10/2024):
• Sale Price: $290,000
• Net Profit: $220,000

Capital Gains Calculation

1. Calculate Total Basis for Person C at Sale:
• Basis: $166,667

2. Calculate Capital Gains:
• Selling Price: $290,000
• Basis: $166,667
• Capital Gain = Selling Price - Basis = $290,000 - $166,667 = $123,333

Depreciation Recapture

• Since no depreciation has ever been taken by any owner, there will be no depreciation recapture to consider in this case.

Final Capital Gains Tax Calculation

• The total capital gains that Person C will be liable for upon selling the property will be $123,333.

Summary

• Capital Gains for Person C: $123,333
• Depreciation Recapture: $0 (since no depreciation was taken)

My Questions

Is the above estimated capital gains tax correct? If not, please indicate any errors you see. 

Does the use of the property as a personal residence by person A and the limited rental period affect the capital gains in any way?

Thank you for your thoughts:

@John Clark : This is a Florida Condo where I am not under special assessments currently and the market has moved, creating a $50k to $70k shift in price and appraisal value if I move on to a new buyer. Buyer has ability to close, so it's a smaller loss to have the complete the purchase before the market gets worse. 

@Chris Seveney: As a first time seller I didn't know if the fees were reasonable. I compared the ALTA to a family member's sale last year and saw about a $1400 difference. Mainly, the one I compared to split the settlement fee between buyer and seller and the title and lien search were $250 cheaper. I was told by my realtor I could use my own title agent so I didn't know if that would help me reduce costs. Is the settlement fee something I have to pay since it wasn't a line item listed in the contract for seller's title expenses?

Quick review of Marc's case on the clerk's website. Looks like that attorney likely said they mailed it and didn't. It is my personal opinion that under the applicable rules, service on pro se parties representing themselves is deemed completed when e-filed by the attorney certifying they mailed you. No proof they actually mailed you is necessary. 

In reviewing what happened to Marc, here's how I plan to mitigate it in my rentals:

1. Lease addendum 1: Landlord and Tenant agree all notices of a change of address under this agreement shall only be made by certified mail. Landlord and Tenant hereby waive all objections and causes of action arising out of or related to any change of address made by means other than certified mail. 

2. Lease addendum 2: No part of this agreement, or any deposits made to or held by the Landlord may be assigned to any third party. The tenant specifically agrees they shall not assign any deposits under this agreement.

3. If I decide to represent myself in court (pro se), I will always register with the Florida Court's e-filing system and add myself to the service list with the first papers filed. I may also ask the court to enter an order that I be served via email. This would prevent any party or attorney from certifying mail service, not mailing and the trying to hold me accountable. 

The foregoing is not legal advice and is shared for informational purposes only on what I see as a practical approach of how I will address such issues. 

Background:

Miami-Dade Condo property.
I am a first-time seller.
No mortgages or loans on my property.
Standard Florida Realtors Association / Florida Bar AS IS Purchase Contract.
Buyer in default on various provisions and must proceed to purchase as a cash purchase, per contract, so there should be no financing related title charge son my end.

I am looking for a flat fee or low-cost title company to assist me with the seller side of the closing and coordinate with the buyer's title company. From my understanding, I will need to have the complete the title and municipal lien searches, correct my title to reflect me as a single owner based on rights of survivorship acquisition and complete all other seller side obligations a title company would handle. 

Does anyone know a flat fee or low-cost title company that can help in Florida? I have come across Beycom, but there is little info available about them and it's not clear if they provide title services unless listing and transacting the sale through them. 

Thank you for your recommendations. 

Background:

Miami-Dade Condo property.
I am a first-time seller.
No mortgages or loans on my property.
Standard Florida Realtors Association / Florida Bar AS IS Purchase Contract.
Buyer in default on various provisions and must proceed to purchase as a cash purchase, per contract, so there should be no financing related title charge son my end.

Contract only lists the following seller/closing/title fees:

A.Documentary stamp taxes and surtax on deed, if any
B. Title search charges
C. Municipal lien search
D. HOA/Condominium Association estoppel fees
E. Recording and other fees needed to cure title
F. Seller's attorneys' fees
G. Other: Not applicable. 

Additional relevant provisions in the contracts:
"Title Evidence and Insurance: a title insurance commitment issued by a Florida licensed title insurer, with legible copies of instruments listed as exceptions attached thereto ("Title Commitment") and, after Closing, an owner's policy of title insurance (see STANDARD A for terms) shall be obtained by the Buyer. If Seller has an owner's policy of title insurance covering the Real Property, Seller shall furnish a copy to Buyer and Closing Agent within 5 days after Effective Date. The owner's title policy premium, title search and closing services (collectively, "Owner's Policy and Charges") shall be paid, as set forth below. The title insurance premium charges for the owner's policy and any lender's policy will be calculated and allocated in accordance with Florida law, but may be reported differently on certain federally mandated closing disclosures and other closing documents. For purposes of this Contract "municipal lien search" means a search of records necessary for the owner's policy of title insurance to be issued without exception for unrecorded
liens imposed pursuant to Chapters 153, 159 or 170, F.S., in favor of any governmental body, authority or agency.

[MIAMI-DADE/BROWARD REGIONAL PROVISION]: Buyer shall designate Closing Agent. Seller shall furnish a copy of a prior owner's policy of title insurance or other evidence of title and pay fees for: (A) a continuation or update of such title evidence, which is acceptable to Buyer's title insurance underwriter for reissue of coverage; (B) tax search; and (C) municipal lien search. Buyer shall obtain and pay for post-Closing
continuation and premium for Buyer's owner's policy, and if applicable, Buyer's lender's policy. Seller shall not be obligated to pay more than $_____________ (if left blank, then $200.00) for abstract continuation or title search ordered or performed by Closing Agent."

I asked for a sample estimate ahead of time to make sure I can check everything.

ALTA Seller's Settlement Statement provided by the buyer's title company lists:

H. Prorated county taxes [lists the amounts for January of this year through closing date]. Even though this isn't anywhere I can see in the contract, I presume to clear the title I have to pay this off.

I. Documentary tax stamp deed to the Clerk of Court [ I verified this as correct for our area]

J. Commissions for the agents: [I verified this as correct]

K. "Consumer Electronic File Storage": $25 [this seems like a bs addon]

L. Wire/Fedex/Courier Fee: $100

M. Municipal Lien Search $400

N. Settlement Fee to Title Company: $895 [I think this is high and seems like they are putting the entire settlement fee on my side and its not listed under my contract costs above]

O. Title Search: $200

P. E-Recording: $18

Q. Recording affidavits and death certificates: $100 [ I gained the property by rights of survivorship and the past owner died but we need to update the title]

My Questions:

1. My understanding is that I do not need to use the Buyer's title company and can choose my own to prepare my seller papers. Is this correct?

2. Do the above fees H through Q look reasonable based on what is typical?

4. Do the fees listed above appear to match what I am required to pay per the contract terms above? For example, I don't see Consumer File Storage or Settlement fee listed in my contract obligations.

3. Are there any fees listed that generally would be paid by the Buyer?

Any responses, advice or suggestions will be greatly appreciated. 

Hello fellow posters. I have an unplanned capital gain over several decades due to a property interest I inherited. I also have the opportunity to be assigned a debt owed to a professional services company. It is likely the debt may not be collectable as the deadbeat clients are keeping everything on an under the table cash basis. Rather than take a complete loss on the uncollectable debt, can I take the assigned debt, make collection efforts and upon failure to collect declare the loss to offset the capital gains? I believe in practice it does not actually offset the capital gains but reduces my taxable income dollar for dollar with the loss, as long as my Modified Adjusted Gross Income (MAGI) is under $150K. Tis dollar for dollar reduction should equate to getting me down to the same amount as if I did not have the capital gains. 

Can someone who has seen this before please confirm if the above is correct and am I missing anything or need to consider anything else. 

Thank you for your help.