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Full-Text Articles in Law
Do Serial Exchangers Get Cash, With Extra Boot, Under New Letter Ruling?, Bradley T. Borden, Kelly E. Alton, Alan S. Lederman
Do Serial Exchangers Get Cash, With Extra Boot, Under New Letter Ruling?, Bradley T. Borden, Kelly E. Alton, Alan S. Lederman
Bradley T. Borden
Related-party exchanges raise the issue of improper extension of the Section 1031(a)(3) 45-day identification and 180-day exchange periods. Related-party exchanges also call into question the amount of boot a related party may receive without triggering an abusive cash-out. A recent letter ruling involving two sequential related-party Section 1031 exchanges makes these issues doubly evident.
Workout-Driven Exchanges, Brad Borden, Todd D. Keator
Workout-Driven Exchanges, Brad Borden, Todd D. Keator
Bradley T. Borden
Market forces in a depressed real estate market often lead to foreclosures, which may generate taxable gain to the debtor. Some foreclosure sales may qualify for Section 1031 nonrecognition, if the debtor properly structures the disposition. This Article discusses structures that help foreclosure transactions qualify for Section 1031 nonrecogntion. The Article also discusses the application of Section 1038 to recquisitions of exchanger-financed relinquished property.
Open Tenancies-In-Common, Brad Borden
Open Tenancies-In-Common, Brad Borden
Bradley T. Borden
Tax law (section 1031 in particular) has spawned a new investment vehicle—open tenancies in common. Tax law allows property owners to exchange into like-kind real property tax free, but finding suitable replacement property can be difficult. Real estate syndicators, recognizing a demand for ready-access replacement property, began offering undivided interests in large multi-million-dollar properties to individual investors exchanging out of smaller properties. Those offerings were the first open tenancies in common. Open tenancies in common are distinguished from traditional or close tenancies in common by the size of coowned property, the coowners’ mutual lack of acquaintance, and the separation of …
Financing Reverse Exchanges And Safeguarding Exchange Proceeds, Brad Borden
Financing Reverse Exchanges And Safeguarding Exchange Proceeds, Brad Borden
Bradley T. Borden
Over the last several years, reverse exchanges have become a fixture of section 1031. A fluid economy and a strained financial industry send a reminder that safe guarding exchange proceeds in reverse exchanges is paramount. This Article reviews reverse exchange structures, both safe harbor and non-safe harbor, and describes how such transactions must be financed to satisfy tax law requirements and safe guard exchange proceeds. The Article is adapted, with permission, from Chapter 5 of Tax-Free Like-Kind Exchanges.
The Like-Kind Exchange Equity Conundrum, Brad Borden
The Like-Kind Exchange Equity Conundrum, Brad Borden
Bradley T. Borden
The tax-free treatment of like-kind exchanges presents one of tax law’s most compelling equity conundrums. Tax law generally does not tax property holders on the appreciation in the property’s value, but it does tax gain or loss recognized by property sellers and exchangers of non-like-kind property. In its basic Aristotelian form, equity requires that likes be treated alike, but it does not provide criteria for determining what is alike. Depending upon the criteria selected, exchangers of like-kind property can be similar to holders, or similar to sellers and exchangers of non-like-kind property. The equity conundrum is whether tax law should …
Like-Kind Exchanges Of Personal-Use Residences, Brad Borden, Alex Hamrick
Like-Kind Exchanges Of Personal-Use Residences, Brad Borden, Alex Hamrick
Bradley T. Borden
The law governing section 1031 exchanges of personal-use residences ranges from very explicit, in the case of principal residences, to very vague, in the case of mixed-use second homes. The law excludes from section 1031 nonrecognition exchanges of property used solely for personal use. The IRS has provided guidance regarding exchanges of mixed-use principal residences and has provided an all-or-nothing safe harbor with limited applicability for exchanges of mixed-use second homes. To complete the body of law governing exchanges of personal-use residences, this article suggests that the IRS should provide broader guidance for exchanges of mixed-use second homes.
Safe Harbors And Careful Planning Make Deferred Exchanges A Valuable Tool, Brad Borden
Safe Harbors And Careful Planning Make Deferred Exchanges A Valuable Tool, Brad Borden
Bradley T. Borden
This Article describes the section 1031 deferred exchange safe harbors. It describes how property owners can structure deferred and multiple-party exchanges to avoid actual and constructive receipt of boot to obtain nonrecognition on the exchange of properties. It demonstrates how property owners can use multiple safe harbors (such as a qualified intermediary and qualified trust) to protect exchange proceeds during the exchange interstice. It also considers the intricacies of the identification rules and the identification and exchange periods. The Article is adapted from Chapter 4 of the forthcoming treatise, Bradley T. Borden, Tax-Free Like-Kind Exchanges (Civic Research Institute 2008).
Tax-Free Like-Kind Exchanges, Brad Borden
Tax-Free Like-Kind Exchanges, Brad Borden
Bradley T. Borden
This is a comprehensive treatise on section 1031 like-kind exchanges.
Section 1031 Alchemy: Transforming Personal Tangible And Intangible Property Into Real Property, Brad Borden, Kelly E. Alton
Section 1031 Alchemy: Transforming Personal Tangible And Intangible Property Into Real Property, Brad Borden, Kelly E. Alton
Bradley T. Borden
Section 1031 nonrecognition applies only to exchanges of like-kind properties. Although real property generally is not like kind to personal property or intangible property, case law reveals that personal property and intangible property can be combined with certain real property interests and become like kind to real property. The Article distills four basic rules for transforming personal property and intangible property into real property for section 1031 purposes. It also examines untested theories about transforming personal and intangible property into real property and considers the viability of such theories.
Rev. Proc. 2004-51: The Irs Strikes Back, Brad Borden, Kelly E. Alton, Alan S. Lederman
Rev. Proc. 2004-51: The Irs Strikes Back, Brad Borden, Kelly E. Alton, Alan S. Lederman
Bradley T. Borden
Perhaps the most controversial income tax question in the real estate industry in 2004 was whether a seller of real estate could use Section 1031 proceeds to construct a new building on land already controlled by that taxpayer. In an earlier major development for the U.S. real estate industry, the IRS, in PLR 200251008, favorably permitted a reinvestment of exchange proceeds into the cost of a new building built on land leased from the seller's affiliate. In Rev. Proc. 2004-51, however, the IRS indicated that it was considering reversing its position so as to no longer permit the outcome in …
Section 1031 And Proximate And Midstream Business Transactions, Brad Borden
Section 1031 And Proximate And Midstream Business Transactions, Brad Borden
Bradley T. Borden
Section 1031 exchanges frequently occur in proximity to business transactions (i.e., entity formations, mergers, divisions, and dissolutions). Although section 1031 exchanges and many business transactions can be tax free, the proximity of such transactions often presents challenging legal and theoretical questions. In fact, depending on the order of the transactions, taxpayers may lose the tax-free treatment of the exchange or of the proximate business transaction. This Article examines the tax consequences and theoretical aspects of section 1031 exchanges and proximate business transactions.
The Whole Truth About Using Partial Real Estate Interests In Section 1031 Exchanges, Brad Borden
The Whole Truth About Using Partial Real Estate Interests In Section 1031 Exchanges, Brad Borden
Bradley T. Borden
A myth persists. Many believe that section 1031 treats all real property as like kind and state law determines whether property is real property. This Article examines the many cases and rulings that consider partial real estate interests and reveals that there are many exceptions to this accepted rule.
Reverse Like-Kind Exchanges: A Principled Approach, Brad Borden
Reverse Like-Kind Exchanges: A Principled Approach, Brad Borden
Bradley T. Borden
Even with the Internal Revenue Service's publishing Rev. Proc. 2000-37, there is no authoritative guidance regarding true reverse exchanges. This Article examines the principles and policy supporting nonrecognition treatment of like-kind exchanges. It then describes how courts have interpreted the exchange requirement in light of the continued-investment purpose of section 1031. Extrapolating this interpretation to reverse exchanges, the Article recommends a workable model for structuring true reverse exchanges that should qualify for section 1031 treatment.