Concepts and Mechanics of Exchanges

  • Credits: 13
  • Format: Self-Study eBook
  • Field of Study: Federal Tax Update
  • Author/ Speaker: Danny C. Santucci

Course ID: Advanced Preparation: Experience Level:
EWTFM-U-01608-20-S | 6233-CE-0335 None Overview
Published Date: Program Prerequisites: Other Course Formats:
© Oct 2019 General Understanding of Taxes eBook | Self-Study

COURSE DESCRIPTION

While tax reform visions have changed the tax on profits realized from the disposition of the real estate, investors still seek escape hatches from the capital gain tax. Tax-deferred exchanges permit the disposition of property often with the taxpayer receiving significant cash but without the payment of any tax. Functionally, an exchange is a bridge over the normally taxable event of moving from one property to another.

This course alerts the practitioner to the different planning opportunities that surround exchanging. Participants will be able to identify, analyze, and handle effectively the complex tax problems that arise under Section 1031. This understanding will be directly applied to the structuring and audit survival of multiparty and delayed exchanges.

Learning Objectives:

After reading the course material, you will be able to:

  • Identify factors that determine the popularity of exchanging, specify tax law changes influencing exchange popularity and the impact of current capital gains rates, recognize the capital gain rate "baskets" and determine the tax treatment of assets in each category.
  • Recognize the differences between exchanges and installment sales and the cost benefits of each, identify several advantages given to exchanging by recent legislation and specify continuing problems that can arise with an installment sale that can act as an impetus for using an exchange.
  • Specify multiple tax benefits of exchanges and the advantages they create over installment sales and determine issues that can be resolved or facilitated by using a like-kind exchange.
  • Specify instances where the IRS may assert an unintended mandatory application of Section 1031.
  • Identify excluded property types from qualified property types by determining the meaning the phrases “held for productive use in a trade or business,” “productive use,” and “investment purpose” specifying the impact of time and taxpayer intent.
  • Recognize the state of mind issues in the concept “held for productive use in trade or business or for investment” and how qualifying use can ease qualification, determine the differences between Section 1031 and old Section 1034, and cite the same taxpayer requirement and its unsettled caselaw.
  • Identify “boot” and like-kind property specifying boot's potential impact on nonrecognition and list several examples of boot.
  • Identify the categories of property received in an exchange and which category is permitted to recognize loss, recognize how avoiding Section 1031 can allow clients to potentially increase recognizable losses, and determine the tax treatment of non-recognized losses under Section 1031.
  • Determine how to balance multiple party exchanges using the in and out test determining net boot, select optimal exchange property to minimize taxable gain, and identify how to use refinancing, the “Coleman” solution, a wrap-around mortgage or a tax-free “cash out” to balance out an exchange.
  • Determine how to balance multiple party exchanges using the in and out test determining net boot, select optimal exchange property to minimize taxable gain, and identify how to use refinancing, the “Coleman” solution, a wrap-around mortgage or a tax-free “cash out” to balance out an exchange.
  • Identify the distinctions between delayed exchanges and delayed closes particularly as to simultaneity, recall the evolution of delayed exchange requirements from the Starker case through the restrictive TRA ’84-time limits to the present and the popularity of delayed exchanges and specify unresolved issues for delayed exchanges.
  • Identify the purpose a longtime exchange technique called “warehousing,” specify the procedural aspects of reverse exchanges under R.P. 2000-37 and variables impacting its application, recognize the “pot” method recalling the procedural role of “strawmen,” and determine the role of exchange escrows.

Who Should Attend:

  • All Certified Public Accountants (CPAs)
  • Enrolled Agents (EAs)
  • Tax Return Preparers (TRPs)

Qualifies and Approved with All State Boards of Accountancy and the following sponsorship’s:

NASBA
IRS
CTEC