REMERGE
Transaction Coordinators
22691 Lambert St. #154
Lake Forest, CA 92630
Web site: www.remerge.com Phone: 877 4 REMERGE E-mail: remerge@cox.net
JULY 2005 VOLUME 2 ISSUE 7
INVESTING IN REAL ESTATE
Investing in real estate is not just a rich man's
sport. Real estate is the most accessible way to accumulate wealth for the
lower and middle classes. Many
people begin investing in real estate with the purchase of their first primary
residence. When its time to move,
rather than selling, the homeowner decides to keep the house as a rental
property. In doing so, he becomes
a real estate investor.
The investor looks to his real estate Agent for
professional advice. The best and only sound advice an Agent should give to his
client is to consult a real estate attorney or tax professional. However, an Agent who understands and introduces the basic concepts of real estate investment and the benefits of the §1031 Tax Deferred Exchange to his clients may be the primary factor in turning a person of modest earnings into one of substantial wealth over time.
WHAT IS A 1031 TAX DEFERRED EXCHANGE?
The Internal Revenue Code Section §1031 Tax Deferred Exchange is a transaction in which the taxpayer trades investment property (relinquished) for a substitute property (replacement property).
The §1031 Tax Deferred Exchange provides one of the best shelters for deferring capital gains tax. By using the §1031 Tax Deferred Exchange, the taxpayer has the ability to reinvest the proceeds from their relinquished property into a "like-kind" replacement property of equal or greater value without recognising any gain.
THERE ARE RULES
Please consult with a real estate lawyer, tax accountant or §1031 Tax Deferred Exchange specialist to understand all the terms and conditions of a legal exchange. The intention of this article is to bring your attention to 2 key points about §1031 Tax Deferred Exchange, not to provide legal advice.
1.
There is a sequence of events that must occur within specific time periods in order for a §1031 Tax Deferred Exchange to be legal. There are NO exceptions!
2.
In order to meet the qualifications of §1031 Tax Deferred Exchange, prior to closing the sale, the investor must transfer his ownership and equity proceeds of the relinquished property to a Qualified Intermediary or exchange company.
If the investor fails to meet both rules of exchange,
he will pay capital gains taxes on the equity of the relinquished property.
The §1031 Tax Deferred Exchange road is paved with gold but may not be smoothly paved. An investor needs the guidance of a knowledgeable and trustworthy professional to ensure a successful exchange. Because of the risk involved, most escrow companies do not do §1031 transactions. Generally, the investor uses the service of a bonded and trustworthy company that specialises in §1031 Tax Deferred Exchanges.
REMERGE WELCOMES EXCHANGE RESOURCES, INC
REMERGE Transaction Coordinators is involved with residential and commercial investment properties exchange transactions. As a result, we have been investigating companies with whom we can affiliate so that we can offer additional service towards the successful completion of a §1031 Tax Deferred Exchange, whenever it is applicable.
REMERGE proudly announces its affiliation and endorsement of Exchange Resources, Inc (ERI) for real estate investment transactions that require a §1031 Tax Deferred Exchange.
EXCHANGE RESOURCES, INC.
Exchange Resources, Inc.
(ERI) is based in San Diego and has a branch office in Orange County. ERI's large staff includes legal and tax experts in the §1031 Tax Deferred Exchange as well as exchange officers. ERI carries a fidelity bond to assure protection of your funds.
ERI specialises in residential property, commercial
property and personal property exchanges including simultaneous, delayed, build
to suit and reverse exchanges.
(You see how complicated investment exchanges can be?) Let ERI educate and guide both you and your clients through the process and the rules that apply to each §1031 Tax Deferred Exchange option.
Debbie Bannister, Vice
President of ERI conducts FREE educational seminars to real estate Brokers and Realtor
Boards throughout California. She covers the history , current application,
rules and regulations of a legal §1031 Tax Deferred Exchange. Debbie's
seminars have sparked many Agents to realise new dimensions to their real
estate business.
To request written information about the §1031 Tax Deferred Exchange or the schedule of ERI seminars, go to: www.exchangeresources.com or contact Debbie Bannister at dbannister@exchangeresources.net
or call 877-799-1031.
COLD CASE FROM DEBBIE'S CABINET
A Seller listed an investment property he owned for over 20 year so that he could purchase another newer investment property. He intended to take advantage of IRS Code §1031 Tax Deferred Exchange. The Agent wrote up the Seller's first counter offer so that it contained the disclosure language that is required for the Buyer to acknowledge that the subject property will be engaged in a §1031 Tax Deferred Exchange and that he would co-operate with the terms of the exchange.
While in escrow, the Seller proceeded to follow the rules of §1031 Tax Deferred Exchange. The Seller's Agent, however, never contacted a Qualified Intermediary or exchange company during the escrow period. A §1031 Tax Deferred Exchange file was never opened. Unbeknownst to the Seller, escrow closed the sale of his relinquished property as a regular sale. Escrow wired the equity proceeds directly to the Seller's escrow for the purchase of the qualified property.
The Seller assumed he completed a legal §1031 Tax Deferred Exchange. When tax time came around, his accountant informed him that he must pay over $80,000 in capital gains tax for the sale of the investment property. He sued his Agent for negligence and won.
IF YOU ARE A REMERGE CLIENT, THAT WON'T
HAPPEN TO YOU!
Beginning September 1, 2005, REMERGE will actively participate in co-ordinating the opening of a §1031 Tax Deferred Exchange. When you register a NEW LISTING or NEW SALE, you will see a new YES/NO field that queries if a property is a §1031 Tax Deferred Exchange.
Additionally, REMERGE Coordinators will review listing and sales contracts to look for a reference that a transaction is stated to be or may qualify for a §1031 Tax Deferred Exchange. If a contract does not state but the transaction seems to qualify for §1031 Tax Deferred Exchange, we will alert the Agent and his client and await instructions to open or not open a §1031 Tax Deferred Exchange file with a qualified intermediary or exchange company.
If a contract states that the transaction is §1031 Tax Deferred Exchange, REMERGE will open and co-ordinate your client's purchase or sale transaction with the 1031 exchange company that is designated or with Exchange Resources, Inc. if an exchange company is not designated. A §1031 Tie-In Fee of $50.00 will be applied to the transaction co-ordination invoice.
REMERGE diligence to these terms of your transactions
will save your clients thousands of dollars and will make you a hero!
COMMENTS?
SUGGESTIONS?
E-mail to: Shelly Gorenstein, Editor REMERGE Gazette shelly@remerge.com
ROSTER of REMERGE AFFILIATE SERVICES
American Home Shield: Buyer and Seller Home Warranty
Amerispec: Home Inspection (Orange County only)
CA Tax Data: Property Tax Report
Exchange Resources, Inc: 1031 Tax Deferred Exchange
Property Disclosure Services, A First America Title Company: Mandatory Zone Disclosure Report
Terminix: Termite Inspection (Los
Angeles County, Orange County, San Diego County and Inland Empire)
REMERGE
Transaction
Coordinators
Adept
& Loyal
YOU DON'T HAVE TO TRAIN US.
WE DON'T
QUIT ON YOU.
|
REMERGE Staff
|
Phone & Voice Mail
|
Fax
|
E-mail
|
| Shelly Gorenstein, Director | 949-582-5812 x 100 | 949-215-2725 | shelly@remerge.com |
| Robin McCullough, Coordinator | 949-582-5812 x 101 | 949-716-9047 | robin@remerge.com |
| Cindy Guss, Coordinator | 949-582-5812 x 102 | 949-215-3305 | cindy@remerge.com |
| Tatiana Flash, Coordinator | 949-582-5812 x 103 | 949-215-0493 | tatiana@remerge.com |
| Constance Hundley, Coordinator | 949-582-5812 x 104 | 949-215-3856 | connie@remerge.com |
| Charles Gorenstein, Tech Support | 949-215-6220 | 949-716-9177 | remerge@cox.net |