1031 Exchange Services

In a 1031 Exchange, the main services come from a qualified intermediary (QI), also known by names like facilitator or accommodator. The services are offered on fee-for-service basis. The services from the QI include paperwork, oversight, escrow services and making a bona-fide exchange agreement under section 1031 of the Internal Revenue Code.

For Deferred Exchange treatment, the IRS and the Treasury Department have very rigid requirements. Therefore, to pass these requirements, the services from an experienced professional are essential.

To get the services right, it is essential to ascertain the credentials of the service provider before hiring. In a 1031 Exchange, physical possession or receipt of the money resulting from sale of the property is not allowed, and money is held by the QI only. Therefore, his credibility in terms of bonding, background, reputation and financial strength of are crucial.

The QI is supposed to put the exchange fees in a separate account for the taxpayer, and not commingle that money with any other exchange.

There are several private agencies that maintain a database of qualified intermediaries across the United States. They can be of use in selecting the right intermediary with a good reputation, high level of bonding, competitive fee schedule, financial strength, expertise and integrity.

In the exchange process, the quality of the services is marked by speed, accuracy and safety. A good QI will have concern for the safety of the client’s funds. Through unique exchange accounts he can ensure that the funds cannot be deposited or withdrawn without signatures from both the exchanger and the company. Many taxpayers had the bitter experience of exchange funds misused by unscrupulous intermediaries. Every aspect of the exchange has to be managed according to the IRS rules and regulations.

The build-to-suit exchange is now becoming popular, where the QI is a major player. Also called construction or improvement exchange, this variant has the QI himself acquiring fee ownership of the replacement property and making improvements to it.

After the necessary improvements are done, within the exchange period of 180 days, the ownership is then transferred to the Exchanger.

This new variant of the exchange gives the investors a high degree of flexibility and the opportunity to improve upon an existing property or construct a new replacement property itself. Thus, the range of services provided by the QI and associates are unlimited from the word go.

1031 Exchange Forms

Typically, the 1031 Exchange involves forms like brokers’ price opinion, exemption and nonresident waivers, affirmation of residency, declaration of trust, IRS 8824 like kind exchanges, lien waivers, mortgage interest deductions, multifamily mortgage applications, notice of trustees sale, personal financial statements, power of attorney, promissory note, quit claims, schedule of income property, signature affidavit AKA statement or tax information release forms.

IRS Form 8824 has three purposes. It is not very complicated to fill if the three main purposes are understood correctly. The first one is to help the taxpayer report the dates of sale and replacement property closings, together with identification dates. This is to verify 45/180 date requirements. This information has to be in Part One.

Second is for the taxpayer to highlight their sale and purchase numbers (sale price, selling expenses, adjusted basis, depreciation taken, cost of replacement property) in order to make clear whether there was a full or partial exchange. This information should go in Part Three.

The third purpose is to show the new tax basis of the replacement property. The exchange being a deferral of taxes, the gain incurred by the taxpayer in the old property has to show up in the new property through an equal amount of lesser basis. This information must be there in Part Four.

The information in IRS Form 8824 makes the job of the IRS easy, to review a taxpayer’s prior 8824 Forms to ascertain the appropriate amount of taxable gain and see whether taxes are paid as and when the taxpayer decides to sell and not exchange.

But the exchanger or investor need not be baffled by the forms. The companies hired by the investor would provide the guidance and assist them in filling them out. The follow-up is also their responsibility.

Other forms include General Forms and the Official Identification Form to identify Replacement Properties to be returned not later than 45 days after the close of the Relinquished Property. W-9 Form is to request a Taxpayer ID for the investor. Form 593-C is meant for California Residents doing any sort of exchanges.

Forms related to funding issues include Request for Verification of Funds. This is to obtain a statement of the balance in the account, for the client himself or third parties, lenders, etc. The Miscellaneous Disbursement Request form is for releasing disbursements for appraisals, inspection fees, loan fees, etc.

Request for Return of Exchange Funds is for releasing the remaining exchange funds after the exchange is completed, and not for requesting closing money. Earnest Money Deposit Request is for the closing agent, and not for requesting closing money.

There are two major forms of tax-deferred exchanges–simultaneous exchange and delayed exchange. Numerous variations of these two fall into one category or the other.

The most basic type of exchange is the simultaneous exchange, known as In Lieu Exchange. To illustrate, in simultaneous exchange, the seller wants to sell the property A, agreeing to accept Property B in lieu of cash payment. If the Buyer already owns Property B, then the two parties simultaneously transfer their respective properties adhering to the value rules.

In the case of the buyer not owning property B, the buyer must purchase Property B and transfer it to the seller simultaneously with transfer of Property A to the buyer. To preserve the tax-deferred status of the transaction for the seller, he must not receive any cash or debt relief.

The other is delayed exchange known as a Starker exchange. This delayed exchange is done using a Qualified Intermediary (QI). In this type, the seller closes the sale of his property and escrows the proceeds of the sale with a QI. Here the seller is handicapped from taking possession of the proceeds in order to enjoy the tax-deferral status of the transaction.

After closing the sale of his property, the seller gets 45 days to identify the property or properties to be exchanged and should submit that in writing to the QI. The identified properties have to be purchased within 180 days of the sale of the relinquished property.

1031 Exchange

Section 1031 in the Internal Revenue Service is a boon for a prospective investor, selling an investment property and wanting to make a profit by reinvesting in a similar property elsewhere in the country. This wonderful concept works on the principle of gain rolling from the old to the new.

There is widespread ignorance on the modalities about this exchange; as a result, 30-40 percent of property owners end paying tax during the sale. Exchange 1031 not only fructifies into essential tax savings, but also makes possible the swapping of property in the fairest manner at places of choice. No wonder that the 1031 Exchange excites the property market so much.

The new income-generating replacement property gives the investor the double gain of added income and savings from tax that would have otherwise gone to the IRS coffers.

Besides saving the buyer from a huge tax burden coming in the guise of capital gains, the instrument offers maximum immunity and flexibility in reinvesting the money gained from the sale in a replacement property within a given period.

The exchange being time-bound is no kid’s play either. In every exchange of this kind, Qualified Intermediaries (QI) plays a crucial role connecting the buyer and seller. The Federal Tax Code makes service of QI mandatory since 1991 in any exchange.

The federal nature of the 1031 Exchange regulations make the Qualified Intermediary play a wizard in guiding and structuring the exchange, satisfying all parameters and suiting the goals of the clients. It is the QI who does the paperwork required by the IRS to document the exchange. The QI carefully prepares all documents and serves the parties with copies of the exchange agreement, novation agreement and escrow instructions.

The Exchange Agreement reads like a contract between the Exchanger and a Qualified Intermediary. The Exchanger explicitly agrees to transfer his old property to the Intermediary, in lieu of a new property to be supplied by the latter within 180 days. The contract outlines all terms and conditions under which the exchange of properties should take place.

For a 1031 Exchange to take effect, both the old property as well as the new property should be in the category of investment property, capable of generating income. The examples could be rental property, bare land, vacation homes or more.

As soon as the old property is sold, within 45 days the seller has to come out with a list containing two or three probable properties fit for replacement. And the whole process of purchasing the new property or replacement property from the list must be over in a period of 180 days.

The exchange becomes bona-fide only when the title stays intact and whosoever held title to the old relinquished property gets the title of the new property.

In between the sale and purchase of property, the seller of the old property would get no access to the money he accrued from the sale, as the money will be vested with the ‘Qualified Intermediary’ till the exchange gets over.

This 1031 Exchange process has matured and had many names in the past including Like Kind Exchange, Deferred or Delayed Exchange, Simultaneous or Concurrent Exchange, Starker Trust or Exchange, Alderson Exchange, Reverse Exchange, Two, Three, or Four Party Exchange and Baird Exchange.

1031 Exchange Companies

The easiest method to begin a 1031 Exchange transaction is to contact a good Exchange Company. The information concerning the exchanger, time and place of the closings, and a copy of the contract to sell the relinquished property are the preliminary papers to start the process.

From this information, the company makes exchange documents and forwards them to the attorney or customer. The lowest fee charged on a standard deferred exchange is $600.

A 1031 Exchange, like any real estate transaction, involves balancing competing pressures in speed and quality. Therefore, companies in this line recognize pressures and design their service to satisfy both.

Good companies manage all aspects of the exchange. They provide service that is quick, easy to use and backed by experience. In good companies, experienced attorneys are the managers. The senior staff will be rich in experience with regard to investment property transactions. The specialized team of attorneys mainly deals with more complex reverse and build-to-suit exchanges.

The main parameters that distinguish a good and bad exchange company are speed, service and the security they offer the client. Speed lies in the pace at which the company prepares the document. The documents are then sent to the closing table, allowing the seller to close and proceed with the exchange. Service is the dexterity in preparing all documents required for the exchange, including reminders of 45 and 180-day time limits and extensive complimentary consultations.

Security comes in the form of an unconditional guarantee on exchange funds from Insurance Companies: high value fidelity bond coverage and Professional Liability insurance cover.

These days, banks are working with Exchange Service providers. The Cole Taylor Bank of Chicago is one of the largest independent banks in Chicago, and joined hands with Nationwide Exchange Services (NES) of Cupertino in California in a strategic alliance for handling Cole Taylor’s tax-deferred 1031 Exchange business. This Chicago bank specializes in serving the business banking, real estate lending and wealth management of closely-held and family owned small and mid-sized businesses. Cole Taylor Bank is an Equal Housing Lender.

Nationwide Exchange Services is a leading Qualified Intermediary for Tax-Deferred 1031 Exchanges and has conducted thousands of successful 1031 Exchange transactions. It is applying advanced technologies and secure business processes to enhance standards of financial security, visibility and customer service to establish new standards for products and services in 1031 tax-deferred Exchanges.

The alliance enabled the Bank to become part of the NES team and benefited in becoming the primary financial custodian for NES in the Midwest Region. The alliance also helped the bank to offer their customers an expanded set of tax-deferred 1031 Exchange products, such as reverse and build-to-suit exchanges, at the most competitive cost structure.

The systems from NES combined with the bank Cole Taylor’s financial security and brand recognition has spurred confidence in the customers. Collaboratively, they bring distinct advantages to all 1031 customer sets, right commercial developers and corporate entities to individual investors.

Car Donation Tax Deduction

Next to wanting to contribute to charitable causes, perhaps your biggest motivation to donate your car is the substantial tax break it can give you. Don’t be misled by information about your return, because the tax breaks you can get from a car donation may not be as big as you think.

If your car donation is worth more than $500, then you should read “Revenue Provisions” in Section 884 of Title VIII. This details the new restrictions on car donations value at more than the aforementioned amount.

In a nutshell, the provision caps the allowable amount of tax deductions to the gross proceeds received by the recipient (the charitable organization you donate your car to) from the sale of your donated vehicle. When you donate a vehicle with a claimed value of $500 or more, your tax-deductible amount will depend on how the charity uses the vehicle. For example, if the charity sells the car, then you can only deduct the amount of gross proceeds that the charity received from the sale. On the other hand, if the charity plans to use the car for tax-approved charitable work as approved by the law, you can claim the car’s fair market value.

The same law also requires the charity to provide you with a written acknowledgment of the contribution within 30 days from the day you make the donation. If your recipient gives you a false or fraudulent acknowledgment, they will face a penalty.

In many instances the tax breaks you get from donating your car are enough to cover (or exceed) the amount you could have sold the car for. Remember that you usually do not have to pay for any paperwork or dealer fees when you donate your car. In the end it is still more sensible to donate you car rather than sell it. This way you don’t only make a profit – you also help worthy causes.

California Corporations

To conduct business activities in California, you need to be familiar with the business corporation laws of the state. This is because the business corporation laws of California are different from those of the other states of the USA. For example, if your corporation is already registered in another state and you also want it to be registered in California, you will have to make a filing fee to the California Secretary of State. Again, even if your corporation is registered in another state, but is not doing business there, you will still have to pay franchise taxes to the state of California to work there. This means that you will be subject to double taxation. You also need to keep in mind that apart from corporate law, the corporate security laws in California also differ from those of the other states.

To form a corporation in California, you’ll need to draft the Articles of Incorporation. For this, you’ll have to give details such as the name of your business company, office address, and the name of a registered agent. Next, you will have to present your document to the California Secretary of State, Corporations Division, which will then process your application. Once your document is found to be in order, your business will be incorporated as a limited liability company.

Besides this, you may also include the Articles of Organization, Articles of Amendment and also the Articles of Dissolution in your incorporation document. The office of the Secretary also allows you to opt for Foreign Qualification, which means that you can do business with any organization outside the state of California.

You have the option of choosing the name of your California business corporation, which once approved will be reserved as exclusively yours. It must however be noted that the State of California has its own rules in respect of naming a corporation. Your corporation name should have some corporate indicator such as Inc., Corp., Incorporated, or Corporation.

California Corporation Commissions

California Corporation Commission is a statutory authority whose job is to oversee the functioning of the department of corporations and also to frame policies for its proper functioning. The Commissioner, who is the chief executive officer, heads the commission. He is assisted by a team of officers who advise him on the day to day financial and other administrative operations. There is also a public relations officer who coordinates the activities of all the departments of the commission.

The main function of the commission is to inform and educate the general public on important financial and investment issues. In addition, the commission is also equipped with powers to enforce the law to protect innocent businessmen. For this, it has an enforcement division, which investigates the irregularities and other acts of omission and commission and brings the defaulters to book through the process of litigation.

There may be situations when in order to evade state taxes, people may not procure licenses to conduct their business. The commission investigates such cases and takes appropriate action against them. There may even be licensed corporations that violate the state law. The commission takes action, and in case of serious offences, files cases against them in the court of law. There may be other financial violations and fraudulent activities. The commission refers such cases to the District Attorney for prosecution.

The commission is invested with certain powers to stop violations of the law. Yet, it does not have the powers of the court of law. It can only report the cases to the court, but cannot act on behalf of the victims of fraud. However, the commission does cooperate with the lawyers of the victims by furnishing facts and figures. This goes a long way in helping them get back their money. It should, however, be clear that the investor has to find his legal resources to get the refunds. Also, the commission conducts its investigations in complete secrecy and the complaints of the aggrieved persons are not made public.

Buying Tax Liens

There are times when a property owner is unable to pay the required property tax. At such time they become delinquent taxpayer and the appropriate governing authority is in charge for collecting property taxes. This collection can be achieved through a tax auction. That brings us to the question, What is a Tax Lien auction? A tax lien auction is a court-ordered auction. Depending upon the state and the nature of sales it can be an auction for a Tax Deed Sales or Tax Lien Certificates.

You can buy a tax lien at auctions held by the taxing authority, which are generally held once a year. Depending upon the state and county that you are accessing there may be several types of auction bidding. Sometimes, not all Tax Liens are sold at the auction. This could either because of lack of bidding or because there were no acceptable bids. In such scenario, the Tax Lien can be bought over the counter at a later date.

You are not required to attend the auction to make a purchase. You can also buy a Tax Lien over the web and in mail. However, it is recommended that you buy them in person over the counter to eliminate error.

Buying tax liens is a very well hidden real estate investing secret. Many Americans are still not aware of the profit potential of such investment. Depending on the state where you buy the tax lien you can more often than not earn 18% to 50% or more per year. And if the delinquent taxpayer does not fall through the repayment, you still have the court backing the foreclosure of the property. Therefore, buying a tax lien allows you to have either the higher yield from repayment of tax or the actual title to property at a substantial discount.

However, before you jump onto this band wagon, it is advised that you do all the required homework. You can get information on a regular basis from the Review regional foreclosure lists.

Business Tax Attorneys

Business tax is tax paid by individuals who run businesses and business organizations. Business tax attorneys guide businesses through the intricacies of tax planning and act as advisors and negotiators in case the government contests taxation claims. Their guidance will help minimize tax liabilities, helps maximize profits through the business, avoid possible tax avoidance investigation by the government, and make expert counsel available in case of litigation.

US tax laws are extremely complicated due to a bewildering range of tax laws relating to sales tax, employment tax, property tax, international business tax, and local and federal tax laws. It is in the interests of those starting a business to retain a competent tax attorney who will advise on the best way to structure the business in order to take advantage of exemptions and rebates under tax laws without getting into legal hassles with tax departments. Even established businesses need to consult business tax attorneys in order to restructure their businesses in a way that maximizes business and minimizes tax.

Business tax attorneys will guide you or your organization through the nitty-gritty of tax planning for business contracts, acquisitions, mergers, ownership, joint ventures, overseas investment, divestiture, and lease agreements.

In the case of audits by the IRS, business tax attorneys are able to reach out of court settlements with the authorities on behalf of their clients. If the tax authorities decide to go ahead and take proceedings, then a business tax attorney will represent her client in these cases. A competent attorney can get a beneficial arrangement for her client.

Business tax attorneys should be selected on the basis of their areas of expertise. The attorney should have experience in representing businesses and should be able to interact with company management, employees, and financial planners, and have sound knowledge of federal and local tax laws.

Business Incorporation Services

Incorporation services for businesses differ from those for non-profit organizations and limited liability companies. It is important for you to decide which state you want your company to be incorporated in. If you have business dealings in more than one state, the best option for you would be to incorporate in Delaware or Nevada, where incorporation laws benefit businessmen most.

Active Filings is a company that provides business incorporation services online and offline in all 50 states. Their website claims to give the customer the structure and protection his business needs to run smoothly. And they are at your service even after you incorporate, helping you get an Employment Identification Number, conduct your corporation’s first meeting and many similar tasks. Services offered by Active Filings are of three types x96 Basic Incorporation, Full Incorporation and International Services. You can get a quote and order online for $539 for full incorporation and $299 for basic incorporation.

Form-a-corp.com provides incorporation services that include all that you would need to form a corporation in any state in America. This company submits all the required documents for the filing of your corporation and ensures that you get the original documents signed and approved by the state.

Mynewventure.com offers low cost incorporation services for small and medium-sized businesses that may find attorney fees unaffordable. Basic services like name search and reservations, business formation documents preparation and filing and application for federal tax ID number are offered at this company for just $149, whereas their premium services like customized stock certificates, corporate seal, stock transfer ledgers and business forms come for a price of $359. The website also has a medium deluxe package for $239 that comes with all the basic services and some specialized services.