How to Ensure Proper Timing in 1031 Exchanges

In the complex navigation of 1031 exchanges of commercial real estate, the timing of ownership and execution of like-kind exchanges are among the top considerations. While 1031 exchanges themselves provide property owners with the flexibility to update their investment mix, the IRS allows very little leeway in terms of timing.

First, property owners must consider the amount of time they owned a property before selling it as a part of a 1031 exchange. While there is no specific law dictating a minimum or maximum time of ownership, best practices supported by several U.S. Tax Court decisions dictate that owners should hold a property for at least two years before selling it. This means that “flippers” may not qualify.

The next timing issue concerns the completion of the exchange. The requisite time to identify and close on replacement property is crucial. In many circumstances, a property owner will complete the sale and subsequent purchase of like-kind commercial real estate simultaneously. While this may be an ideal scenario, it is not always the most practical. For example, there are times when a seller will have a hard time finding a suitable replacement property or portfolio of properties in which to reinvest his or her sales proceeds. In these scenarios, sellers must know that they have 45 days after transferring a deed to a buyer to identify up to three possible replacement properties. Within 180 days of the deed transfer, or the due date of the seller’s tax return including any extensions, the seller must complete the purchase and take possession of the replacement property.

There are exceptions to these rules, including reverse exchanges which allow sellers more time provided they meet other criteria.

As tax laws continue to evolve, it is important to have the support of a team of experienced professionals who understand these complex processes and procedures and can help identify replacement property or properties in the allowable time frames.

The professionals with Orion Real Estate Group work with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.

What You Need to Know About 1031 Exchanges

Thanks to historically low interest rates, rising appraisals and continued investment from foreign sources, certain U.S. property owners currently have a unique opportunity to defer taxes on profits earned from the sale of long-held and appreciated real estate. Under Section 1031 of the Internal Revenue Code, owners of investment or business property may defer paying taxes on the gain from property sales when they reinvest the proceeds in similar, like-kind property. Moreover, a like-kind exchange and deferral on gains from investment property may reduce an individual’s exposure to the Net Investment Income Tax (NIIT).

However, executing this type of transaction requires a keen understanding of the tax code and planning under the direction of qualified advisors. Key points that anyone considering a 1031 exchange must take into consideration include:

• The number of years they own a property before a potential sale
• The way in which they structured their ownership of the property
• Whether the property they seek to sell and buy meets the criteria for a like-kind exchange
• The requisite timing to identify and close on replacement property
• Identifying a qualified intermediary to facilitate the transaction

1031 exchanges continue to advance the commercial real estate investment market and can be a vital part of a property owner’s tax-planning process. An estimated 30 percent of $400 billion-to-$500 billion annual commercial real estate transaction volume is carried out using 1031 exchanges.

It is worthwhile for property owners to talk with experienced real estate professionals who can help to guide the decision-making process and determine if and how a 1031 exchange is the best path forward.

The professionals with Orion Real Estate Group work with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.

Visit Orion Miami at ICSC Recon in Las Vegas

From May 21 to May 24, 37,000 real estate industry professionals from 58 countries are expected to convene in Las Vegas for the International Council of Shopping Centers (ICSC) annual Recon event. Among those in attendance will be members of Orion Real Estate Group, who will be based at booth S320P in the South Hall of the Las Vegas Convention Center.

Stop by the booth to speak with Orion’s President and Founder Joe Sanz, Chief Investment Strategist Barry Brant, Senior Vice President Norman Buhrmaster and investment managers Kevin Sanz and Chris Sanz. Learn about the firm’s diverse range of services, including commercial real estate development, leasing, brokerage, property management, sale-lease backs and private placement investment.

Will you be attending ICSC Recon at the Las Vegas Convention Center? Please visit the Orion Real Estate Group booth or contact us in advance to schedule a meeting. Use this floor map to find us at Booth S320P. We hope to see you there.

The professionals with Orion Real Estate Group work with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.

Orion Closes on Another Commercial Property

This week Orion Real Estate Group sold a Wells Fargo branch in Rockledge, FL, for $1.125 million. The firm continues to acquire and dispose of commercial properties at an active pace and has cash to buy in Florida and across the country.