The Flip Board

(Listen Here 2:53 min)

How Can You Keep Your Money Safe During a 1031
Tax Deferred Exchange?

Many people feel uneasy in today’s uncertain economic times.  This can be especially so in a 1031 exchange.

When you are doing a typical delayed 1031 exchange, you are assigning to your qualified intermediary (or “QI”) the rights to take your money from the sale of your old relinquished property…but do you really know what happens to your money while your QI is holding it for you?  How can you feel safe?

The Answer is 100% Transparency

100% transparency means complete openness and clear communication in your 1031 exchange agreement.  Your QI should agree in writing that: 

1. Your money will not be mixed or commingled with any other customers funds or with the operating account of the QI;
2. Your money will be deposited directly (immediately after closing of the sale) into a separate segregated FDIC insured bank account; and
3. Your money will earn a specified rate of interest.

(Listen Here 4:05 min)

Hi this is Jeff Peterson – Professor 1031 with 1031Podcast.com.  Today I am talking about 1031 exchanges involving foreign property.

Many people ask Can You Exchange of US property for foreign property such as property in Mexico or Canada?

The rules on foreign exchanges are set out in I.R.C. Section 1031(h).

Remember that in order to qualify for tax deferral, the exchange must be of “like-kind property”.  In 1031(h) Congress made it so “ property located in the United States and property located outside the United States are NOT considered to be “like kind”.

1031 Exchanges Involving US Territories

The next Logical Question is what about US Territories such as: Guam, Puerto Rico and the U.S. Virgin Islands.  Can You exchange US Property for property in the US Territories?

According to Private Letter Ruling 200040017, the answer appears to be a limited YES – but the authority is ONLY to the U.S. Virgin Islands…and ONLY if the USVI Replacement Property is held to produce income.  Guam and Puerto Rico may not qualify because the IRS has not ruled on specifically on them.  The Internal Revenue Code only defines the "United States" to include states and the District of Columbia.

It seems strange, but the Internal Revenue Service has ruled that property located in the U.S. Virgin Islands qualifies for 1031 like-kind exchange treatment, provided it produces income for U.S. citizens… and has left out Guam and Puerto Rico.

Foreign to Foreign 1031 Exchanges
(Involving Only Non US property)

Remember…US taxpayers can be taxed on income earned anywhere… even income earned outside of the US.

One interesting point to keep in mind is that foreign property can be exchanged for other foreign property…so theoretically, a US tax payer could exchange Non-US property for other Non-US property.  Any US taxpayer’s investing in other counties who sells foreign property held for “investment” or for “use in a trade or business”; and who then buys other like-kind foreign property that’s also held for a qualifying purpose, should be aware that foreign property can be considered to be of like-kind to other foreign property.  So yes…You Can Exchange foreign property of for other foreign property!

For more information call me (toll free) at 1-888-308-1031 or visit 1031Podcast.com.

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The housing bubble was caused by poor lending standards, lax regulation, and low interest rates. Poor lending standards have met a natural death, lax regulation is irrelevant now — it turns out banks do self-regulate when lower executive bonuses are suddenly on the table — but today’s low interest rates should surely impact housing prices.

But is it enough to save the housing market? And what does it mean to your stock portfolio and your real estate business?

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