Last month, NES Financial attended the International Council of Shopping Centers’ (ICSC) RECon event, which took place May 22-25 in Las Vegas, Nevada.
At the event, NES Financial answered a number of questions regarding our industry-leading EB-5, 1031, and fund administration solutions. Our 1031 solutions garnered particular interest, and drew a number of questions from attendees, including:
What types of property are eligible for a 1031 exchange?
Jill Jones, NES Financial’s Assistant General Counsel, spoke to two exchangers who were considering using a 1031 exchange for several upcoming real estate transactions and who were devastated to learn that several million dollars of commercial landscaping equipment they had just sold could have been exchanged as well.
In order to qualify for a 1031 exchange, property must have been held for productive use in trade or business or for investment and exchanged for property of “like-kind.” Property held primarily for sale (e.g., inventory or dealer property), property that serves as the exchanger’s primary personal residence, and stocks, bonds, promissory notes, partnership interests, and other securities are not eligible for 1031 exchanges.
Beyond those restrictions however, almost all real, personal, and intangible property can qualify for tax deferral through a 1031 exchange, provided the exchanger identifies and acquires like-kind replacement property within the 45- and 180-day limitations.
In addition to real estate, a 1031 exchange can be used for a large variety of other asset types, including, aircraft, cars, trucks, rail cars, agriculture, construction equipment, manufacturing equipment, electromagnetic spectrum, and even artwork.
Are all qualified intermediaries equally secure?
Though many may recall the qualified intermediary (QI) defalcations which occurred around the time of the 2008 financial crisis, not everyone knows how to ensure that their exchange funds are secure today.
Without the right safeguards in place, exchange funds can be lost if the QI goes bankrupt or otherwise fails; some unscrupulous QIs have even absconded with exchange monies or invested those funds in illiquid or other inappropriate assets, making choosing the right QI for your exchange essential.
NES Financial’s 1031 Exchange Solutions have been purpose-built to ensure secure, transparent, and compliant exchanges. Our experience and expertise enable us to work with forward, reverse, and program exchanges across a wide range of asset types, and our General Counsel Kelly Alton helped develop significant 1031 guidance during her tenure at the IRS National Office in Washington, D.C..
To find out more about deferring capital gains and depreciation recapture taxes through a 1031 exchange, download our 1031 solution kit now.