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By ZACHARY BRADLEY, for exchangestarker.net 8/30/2007

IRC 1031 provides that to qualify for tax deferred treatment, the relinquished property must be exchanged for replacement property that is like kind. The fundamental advantages of a tax deferred exchange may be utilized to diversify, consolidate or leverage your investment portfolio. After the acquisition of the replacement property closes, the Qualifying Intermediary delivers the property to the taxpayer, all without the taxpayer ever having constructive receipt of the funds. After living in the property for at least two years, 24 months, not necessarily consecutive the Investor would qualify for the Section 121 Exclusion. In 2000, the IRS released Revenue Procedure 2000-37, which officially approves and gives guidance for Reverse Exchanges. Revenue Procedure 2000-37 applies only to transactions in which an exchange accommodation titleholder (EAT) acquires qualified indicia of ownership of property on or after September 15, 2000. In 1991, the IRS announced that the like-kind exchange rules did not apply to reverse exchanges. It is a hybrid of the common installment sale and a structured annuity, and it enables the seller to collect a stream of payments, leverage equity, earn a pre-tax return, and other benefits.

The range of tenancy in common products

031 Exchange is part of the strategy as people are realizing what a sound investment property is and jumping into the rental business. The principal issue in a parking arrangement is whether the accommodation party owns the replacement property for tax purposes, whether he has sufficient burdens and benefits of ownership. There is usually a small amount left over as monthly profit for the investor (positive cash flow), but the greater investment payoff comes from building equity in the property using the lessee's rent money. Real estate transactions fail to close for many reasons: problems discovered during the property inspection, defects in structure, tenant issues, environmental problems, particularly difficult third parties, etc. These leases are not terminable by the tenant, nor are rent abatements permissible.

Tax time and the tenancy in common

The one-time, over-55 exemption was becoming more of a one-time problem. Permitted investments with a self-directed IRA include not only bank certificates of deposit, stocks, bonds, and mutual funds, but also real estate.The total amount of the investment allocated to the equipment Tangible Drilling Costs (TDC) is 100% tax deductible. By combining the benefits of Sections 1031 and 121, the Investor is in a sense creating the best of both tax worlds on single-use property: creating a tax-free sale as opposed to a tax-deferred exchange. You must use an Exchange Accommodation Titleholder (EAT) to take title to your replacement property until you sell your existing property. Tax credits may be earned for rehabilitating nonresidential buildings built in 1935 or before.x

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