The Federal Open Market Committee provided a more encouranging appraisal of the United States economy today. However, FOMC members still voted to keep the closely watched Federal Funds interest rate unchanged and there was no indication that the Federal Reserve Bank would raise rates anytime soon despite better-than-expected November 2009 employment numbers.
The Federal Reserve Bank said it will continue its plans to withdraw certain lending programs over the next few months — an indication that the Federal Reserve Bank may start to unwind more significant asset purchases shortly thereafter.
The Federal Reserve Bank and its policymaking colleagues at the FOMC said that "the deterioration in the labor market is abating." This was the Federal Reserve Bank's first formal declaration that an very difficult employment outlook is actually brightening. The national unemployment rate slipped to 10% in November 2009 from 10.2% in October 2009.
The Federal Reserve Bank also stated that, "Financial market conditions have become more supportive of economic growth," in an indication stringent credit markets are loosening a bit. Also, consumer spending seems to be "expanding at a moderate rate," the Federal Reserve Board said, describing income growth as "modest."
Both statements represent upgrades over prior month statements. And, there have been many encouraging signs recently that the economic recovery is building.
Wednesday, December 16, 2009
1031 Exchange of Foreign Property or Assets
London Property Exchanged for London Property
I just completed a 1031 exchange that involved the sale of a London Flat as the taxpayer's relinquished property and the purchase of another London Flat as the replacement property. The two properties are being treated and used as rental properties.
1031 Exchange of Foreign Property
You are probably wondering how this can be. You are not alone. There are many who do not realize that you can 1031 exchange foreign property for other foreign property.
Properties Must Be Qualified Use Properties
The key is that both properties must be "Qualified Use Properties" (i.e. held for investment, rental or use in a business) in order to qualify under Section 1031. The other issue is that there must be a United State income tax consequence in order for the 1031 Exchange to provide any benefit.
So, as long as the taxpayer is a U.S. taxpayer that will have a U.S. tax consequence upon the sale of the foreign property and the property is held as investment property, it can be exchanged for other foreign property.
Properties Must All Be Foreign Properties
You can not sell foreign property and exchange into domestic property (i.e. U.S. property) or sell domestic property and exchange into foreign property. The properties involved in a 1031 Exchange must either be all domestic properties (all U.S. properties) or all foreign properties (all non-domestic properties).
I just completed a 1031 exchange that involved the sale of a London Flat as the taxpayer's relinquished property and the purchase of another London Flat as the replacement property. The two properties are being treated and used as rental properties.
1031 Exchange of Foreign Property
You are probably wondering how this can be. You are not alone. There are many who do not realize that you can 1031 exchange foreign property for other foreign property.
Properties Must Be Qualified Use Properties
The key is that both properties must be "Qualified Use Properties" (i.e. held for investment, rental or use in a business) in order to qualify under Section 1031. The other issue is that there must be a United State income tax consequence in order for the 1031 Exchange to provide any benefit.
So, as long as the taxpayer is a U.S. taxpayer that will have a U.S. tax consequence upon the sale of the foreign property and the property is held as investment property, it can be exchanged for other foreign property.
Properties Must All Be Foreign Properties
You can not sell foreign property and exchange into domestic property (i.e. U.S. property) or sell domestic property and exchange into foreign property. The properties involved in a 1031 Exchange must either be all domestic properties (all U.S. properties) or all foreign properties (all non-domestic properties).
Tuesday, December 15, 2009
This IS and WILL be the BEST Market to Trade Up in Your Lifetime!
I just read a blog post on Active Rain (a social media website for real estate professionals) that I could not agree with more. It is all about trading up and buying now. It's about getting into the game before the prices start going back up.
The blog post was discussing residential property to be used as your primary residence, but the same can be said for investment property, too. I've posted about this topic before. This is and will be the most important buying opportunity that most of us will ever see during our lifetime. The real estate market, and most other markets for that matter are on sale, and available for those who jump on it.
Now, I'm not professing that the market is going to jump and bounce back so fast that you will make a quick buck. I think this will be a slow crawl out of the hole kind of a recovery, but I've seen the same mistakes during the 70's, 80's and 90's. Investors wait until it feels right and then realize that they have missed the market and then they decide to wait until it comes back down. The markets have dropped so much, now is the time.
What if it drops another 5% or 10% you ask? It might, but it has already dropped 30% to 50% in many markets. You can acquire now and lock in the 30% to 50% discount and then hold tight until the market does come back.
Most people who sell investment property and then buy replacement property through a 1031 Exchange either want to diversify or consolidate their holdings, but the new trend in today's market is to reposition your real estate portfolio. Take advantage of these prices to get the properties that you want.
The blog post was discussing residential property to be used as your primary residence, but the same can be said for investment property, too. I've posted about this topic before. This is and will be the most important buying opportunity that most of us will ever see during our lifetime. The real estate market, and most other markets for that matter are on sale, and available for those who jump on it.
Now, I'm not professing that the market is going to jump and bounce back so fast that you will make a quick buck. I think this will be a slow crawl out of the hole kind of a recovery, but I've seen the same mistakes during the 70's, 80's and 90's. Investors wait until it feels right and then realize that they have missed the market and then they decide to wait until it comes back down. The markets have dropped so much, now is the time.
What if it drops another 5% or 10% you ask? It might, but it has already dropped 30% to 50% in many markets. You can acquire now and lock in the 30% to 50% discount and then hold tight until the market does come back.
Most people who sell investment property and then buy replacement property through a 1031 Exchange either want to diversify or consolidate their holdings, but the new trend in today's market is to reposition your real estate portfolio. Take advantage of these prices to get the properties that you want.
Monday, December 14, 2009
Reverse 1031 Exchanges Are NOT Monsters
I just finished reading an entire message board thread that started with a post by a member of the board that wanted to structure a Reverse 1031 Exchange but was concerned that everyone seemed to call Reverse Exchanges "Monsters."
Reverse 1031 Exchanges NOT Monsters
Now, I've been administering Reverse 1031 Exchanges for many years now, and I can tell you that they are more complicated and absolutely do require more proactive planning compared to regular forward 1031 Exchanges if you want to be successful with your Reverse 1031 Exchange. And, Investors that merely jump into a Reverse Exchange without any planning and good understanding of what is involved is asking for a difficult and challenging Reverse 1031 Exchange. I do not deny any of that.
Powerful 1031 Exchange Strategy
However, when Reverse 1031 Exchanges are used properly and are planned for well in advance, they can be a very powerful strategy in reducing the amount of risk involved with locating, identifying and acquiring suitable replacement property in your 1031 Exchange. I prefer to use the Reverse 1031 Exchange when ever possible so that I can acquire first and not have to worry about whether or not I will be able to acquire my replacement property.
My advice
Just do you homework, ask lots of questions, retain the services of an experienced Reverse 1031 Exchange services provider, make sure that you have a clear picture of what will happen in your Reverse 1031 Exchange, and absolutely do not pick your Reverse 1031 Exchange service provider merely based on fees, or you will be sorry. You definitely get what you pay for in the Reverse 1031 Exchange field. Experience and expertise and priceless for a smooth Reverse 1031 Exchange transaction.
Reverse 1031 Exchanges NOT Monsters
Now, I've been administering Reverse 1031 Exchanges for many years now, and I can tell you that they are more complicated and absolutely do require more proactive planning compared to regular forward 1031 Exchanges if you want to be successful with your Reverse 1031 Exchange. And, Investors that merely jump into a Reverse Exchange without any planning and good understanding of what is involved is asking for a difficult and challenging Reverse 1031 Exchange. I do not deny any of that.
Powerful 1031 Exchange Strategy
However, when Reverse 1031 Exchanges are used properly and are planned for well in advance, they can be a very powerful strategy in reducing the amount of risk involved with locating, identifying and acquiring suitable replacement property in your 1031 Exchange. I prefer to use the Reverse 1031 Exchange when ever possible so that I can acquire first and not have to worry about whether or not I will be able to acquire my replacement property.
My advice
Just do you homework, ask lots of questions, retain the services of an experienced Reverse 1031 Exchange services provider, make sure that you have a clear picture of what will happen in your Reverse 1031 Exchange, and absolutely do not pick your Reverse 1031 Exchange service provider merely based on fees, or you will be sorry. You definitely get what you pay for in the Reverse 1031 Exchange field. Experience and expertise and priceless for a smooth Reverse 1031 Exchange transaction.
Wednesday, December 09, 2009
Holding Real Property in a Partnership or Multi-Member LLC
This is just a quick note about issues involved with property held in a general partnership, limited partnership, or multiple member limited liability company and the complex problems that can arise when the underlying partners want to dispose of the real estate and subsequently structure a 1031 Exchange.
It is important to note that the entity itself (i.e. the partnership) is the owner of the property, and therefore any 1031 Exchange structure should be completed at the entity level. The underlying partners do not own an interest in real estate. The partners own an interest in the partnership (partnership interest), which is personal property and not real property.
There are solutions for these scenarios, but it generally takes advanced, proactive planning in order to properly structure a solution. I would recommend that you speak with your legal and tax advisors today if you already own property in a partnership or other separate entity in order to discuss how to restructure your ownership position now before it becomese a problem at the time of actual disposition.
It is important to note that the entity itself (i.e. the partnership) is the owner of the property, and therefore any 1031 Exchange structure should be completed at the entity level. The underlying partners do not own an interest in real estate. The partners own an interest in the partnership (partnership interest), which is personal property and not real property.
There are solutions for these scenarios, but it generally takes advanced, proactive planning in order to properly structure a solution. I would recommend that you speak with your legal and tax advisors today if you already own property in a partnership or other separate entity in order to discuss how to restructure your ownership position now before it becomese a problem at the time of actual disposition.
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