All Forum Posts by: Drew Reynolds

@Stan Kaneshige

We are just beginning to see the very first QOF’s form, however there are not many yet. The U.S. Treasury Department and Internal Revenue Service are working on QOF guidelines and regulations. As of now, we understand that the IRS is allowing self-certification of Qualified Opportunity Funds. To self-certify, a taxpayer merely completes a form (which will be released in the summer of 2018), and attaches that form to the taxpayer’s federal income tax return for the taxable year. Consequently, no approval or action by the IRS is required to certify a taxpayer. The IRS also says it will provide more details and additional legal guidance over the next few months.

@Chetan P. if you are asking can you exchange into a property you already own, the answer is no.  It must be a new acquisition.  

@Stan Kaneshige, my firm is a member of a working party group which is working with Congress for the needed clarifications.  QOZs do indeed include all forms of commercial real estate provided it is either new construction or meets the “substantial improvement” qualification (double the basis).  Note that these investments must be made through a Qualified Opportunity Zone Fund. 

Houston Galleria Retail DST

Walmart 1031 Co-Investment

Minimum Investment: $200,000

"Cash-Out" Your 1031 Equity

Expect 61.8% Of Investor's Equity To Be Returned On Tax-Deferred Basis Within 10 Days Of Investing3

Expect 38.2% Of Investor's Equity To Receive Monthly Preferred Return Distributions Of 5.25% per Year3

Walmart Supercenter at the busiest intersection in Texas, 18 years on lease guaranteed by Wal-Mart Stores, Inc. (S&P: AA / Moodys Aa2).

View webinar recording here:  Webinar Recording

Request Offering materials here: PPM Request

Offered Exclusively through 

Drew Reynolds

512-827-3654

[email protected]

www.realized1031.com

FIRM CLOSING DATE: JANUARY 12, 2018.  Accredited Investors only. 

Offering Highlights 1

• Non-Taxable 1031 Equity "Cash-Out"Per IRS rules, "cash-out" mortgage loan proceeds should not be taxable income to investors.

• Tenant Credit Quality:  Walmart (S&P: AA, Moody’s: Aa2), single-tenant net lease, built in 2015, 18 years on lease, plus six 5 year extensions. 

• Diversify Your Holdings: “Cash Out” may afford an opportunity to diversify into non-real estate investments.
• Appraisal / Land Value: Appraised Value: $42,670,0002; Land value estimated at 63% of Appraised Value.
• No Phantom Income: Ten-year, interest-only debt structure creates no phantom income for DST investors.
• Expected Holding Period:  7 to 10 years anticipated holding period; 18 Years remaining on lease term.  Expected to be sold with substantial time remaining on lease.

1See offering materials for a complete description.
2 CBRE, Inc. Appraisal, June 9, 2017.
3 Per loan application with Rialto Mortgage Finance, LLC, subject to finalizing and obtaining mortgage

Hi @Dulce Beltran, you are correct. Generally speaking, REITs do not qualify as like kind property for 1031 exchange purposes. The short explanation of why, is that the IRS deems REITs as a business, not real estate, even though the underlying assets are real estate. The key distinction is that an investor does not hold direct interest in property title under a REIT structure.

There are however, a few ways to potentially exchange into a REIT on an indirect basis. This can be done by either contributing an asset you own to a REIT via a Section 721 UPREIT - however please note that for most investors this may not be feasible as the REIT has to want your asset. The more plausible method is an exchange into a DST and then the DST ultimately executed an UPREIT strategy upon exit, allowing investors the option of receiving REIT shares.

While the REIT shares now potentially offer greater diversification and liquidity, please note that once your shares are sold, you are no longer eligible for another 1031 exchange as you have essentially sold stock, not real estate.

@Dave Foster - you are indeed correct (as always) and a valuable  point of clarification!

Big picture, vacation properties may exchanged.  However, there are some rules you need to be aware of in order to avoid in trouble with the IRS.  The IRC Code Section 280A(d) notes that your vacation home could be considered a rental as long as your personal use is less than the greater of 15 days or 10% of the number of days in a year during which the property is rented to someone else at a fair-market value rate.  

In most cases, the 45- and 180-day deadlines are in-stone and the IRS does not provide extensions. However, there is an important exception.

1031 Deadline Extension For Presidential Declared Disaster Areas

In certain situations, IRS Bulletin 2007-34 provides “affected taxpayers” in Presidentially declared disaster areas with up to a 120 day extension of the 1031 exchange 45- and 180-day deadlines.

What is an “Affected Taxpayer”?

Under Treas. Reg. Sec. 301.7508A-1(d)(1), the term “Affected Taxpayers” generally includes parties that may have difficulty meeting the 45-day identification or 180-day exchange deadlines for any of the following reasons:

1. The relinquished property or the replacement property is located in Presidentially declared disaster area;
2. A party to your transaction has their principal place of business located in a Presidentially declared disaster area. This may include your qualified intermediary, the buyer, your attorney, your lender, or title company;
3. Any party involved in your 1031 exchange transaction is killed, injured, or missing as a result of the Presidentially declared disaster. As morbid as this sounds, this exclusion would theoretically extend to employees, family members, etc.
4. As the result of the Presidentially declared disaster, a document used in your 1031 exchange is damaged, lost, or destroyed.
5. As the result of the Presidentially declared disaster, a bank or lending institution temporarily delays, or decides to not move forward with a mortgage.
6. As the result of the Presidentially declared disaster, a transaction is delayed because of the inability to obtain flood, casualty, or title insurance that is required to complete the transaction

Don’t assume that you’re automatically granted an extension simply because the above conditions are met. Start by reviewing IRS’ News Release for the specific disaster, which is available online in the IRS Newsroom.

@Luke Carl I just PM'ed you with some more detailed information

@Luke Carl no, you don't need to buy just one house for $250k.  You're in the same situation you are in with your original example, just with bigger numbers.  For example, you could buy 5 houses for $50k each.