All Forum Posts by: Christopher Smith

No

I did a 1031 simultaneous exchange of a 100% interest in a relinquished property into a 50% interest in a replacement property. I actually just used the proportionate Zvalues for both properties right off the Zillow site to set the exchange values. 

My assumption was that the Zvalues were both independent and (despite being presumably algorithm only generated) accurate enough to put them beyond any practical challenge.

This was back in the 2010 time frame, so it's a totally done deal without issue. Just my experience.

Who is saying that the appraiser must approve the price and for what reason?

Are you coding the gain as passive?

I live in CA and have out of state rentals.

I've never paid tax on any non rental income to any state other than CA where I'm a resident. Typically most states where you are NOT a resident only effectively tax income specifically attributable to that state in their allocation and appointment calculations. 

Plus for any tax you do pay out of state on your rentals you should normally get a full credit for against your CA tax.

An immediate exchange of currency for currency results in neither a tax loss, nor an economic loss, its simply an exchange of value for value. The only way you would have a loss is if what you paid in measured in US dollars to originally buy the property is more than what you realize measured in US dollars when you sell it. That amount (whether net gain or loss) will implicitly include the delta in the value of the property itself, and the delta in the exchange rate between the two currencies over that period of time. 

Are you a US citizen or resident?

With regard to the fees that is much less expensive than a Delaware Statutory Trust where fees can be upwards of 20% which is totally unacceptable unless you have absolutely no other options. 

With regard to your "DST" and as with many highly structured tax vehicles that have a potential "self dealing" quality to them, there are a number of potential potholes you can easily step in along the way (e.g., constructive receipt doctrine, effective control over nominal 3rd party relationships, lack of genuine risk bearing and compliance with transactional terms, etc.). This increases the perceived risk and perhaps the legal fees to put in place and then defend if necessary.

If I were to go this route I would clearly identify each of these risks individually, understand how the Govt would potentially challenge each of them and then assess in your particular fact pattern how you would effectively rebut a challenge to each. 

Sounds like a lot of moving parts and hoops for the amount of tax savings, but that's just my risk/reward profile speaking. I did a modestly complicated simultaneous 1031 exchange a few years ago with no QI and did all the document drafting myself. I was never challenged, but I was very ready to defend the transaction had it become necessary.

First, How does converting Canadian dollars into US dollars create a loss?

They are just a highly structured form of instalment sale. They come with strings and fees so whether they are worth it depends upon whether you can live with the strings and have enough gain scale to justify the fees.

I was looking at Delaware Statutory Trusts for similar reasons and opted not to go with them as most I've seen are incredibly inefficient due to massive internal fees which grind into dust much of the tax savings, so what would be the point. 

How much gain are we taking about?

I've done two full estates. The first decedent had disposed of all out of state property before death, so no multi jurisdictional issues were present. The second decedent did have property in more than one jurisdiction, but we managed to retitle all of the properties in all jurisdictions in the name of a trust just before death, so a probate filing was avoided thank goodness. So although I am generally aware of what ancillary probate procedures entail, I can't comment from actual experience so I'll pass the ball to someone else who has first hand experience. Good luck.