Current trends of 1031 exchange and Info

1. 1031 Exchanges: PRESENTED BY Angilina Taylor Exchange Specialist® 1031 sponsors.com

2. ABOUT My Company • Exchange Specialist® • Over 15 years in 1031 industry • Involved in exchanges of various size and complexity

3. TODAY’S in 1031 Exchange exchang • Current 1031 trends • Anticipated 1031 activity over next decade • Quick overview of 1031 exchanges • Using your 1031 knowledge to your advantage • Selecting a Qualified Intermediary (QI) • FAQ 1031 exchange

4. 1031 EXCHANGE WHAT IS A 1031 EXCHANGE? A 1031 exchange (IRS Code Section 1031) gives an option to the investor by reinvesting the proceeds from the sale of investment property (known as the “relinquished property”) into qualified replacement property to defer capital gains tax. Not for primary residences, flips or most vacation homes.

5. 1031 BENEFITS

6. The Power of a 1031 Exchange

7. TAX FACTS AND RATES CAPITAL GAINS* • 20% for taxpayers with ordinary incomes exceeding $400,000 ($450,000 for married taxpayers) • 15% for incomes more than approx. $36,000 ($71,000 for married taxpayers) and less than $400,000 ($450,000 for married taxpayers) • 0% for incomes less than approx. $36,000 ($71,000 for married taxpayers) *Consult tax advisor to determine actual tax rates.

8. STATE INCOME TAX • Each state has different rules regarding exchanges. • Pennsylvania generally does NOT recognize a 1031 exchange. • Many states simply follow the Federal Code or have adopted similar regulations • Some states have special requirements such as the replacement property must be located within the state

9. CURRENT TRENDS Triple Net PROPERTIES • Investors are taking advantage of current CRE market opportunities and historically low interest rates to leverage into several replacement properties

10. SHORT EXCHANGE PERIODS • Exchangers are lining up their replacement property and are ready to acquire it immediately after conveying the old property to a buyer • Average exchange is now completed within 45 days (down from average of 180 days just two years ago)

11. REVERSE EXCHANGES • More and more investors are finding the ideal replacement property before lining up a buyer • Must be structured several weeks in advance

12. CURRENT TRENDS EXCHANGING PROPERTY WITH NO GAIN • Investors are exchanging properties with little or no gain, maybe even selling at a loss, to avoid costly depreciation recapture

13. LIKE-KIND EXAMPLES • Examples of like-kind real estate • , rental house • Office building, warehouse, shopping center • Land • Tenant-in-Common (TIC) interest • Conservation easements, utility easements • Leasehold interest of 30 years (including options)

14. LIKE-KIND DEFINED One of the major requirements of Section 1031 is that the replacement property must be like-kind to the relinquished property. In other words, both relinquished and replacement properties must be similar in nature, though they may not serve the same purpose. For example, using a 1031 exchange, you can exchange any investment property (rental, industrial, multi-family, etc.) for another and defer up to 100% capital gains tax.

15. 10 31 exchange deadlines • QI acts as “middleman” to facilitate an exchange • Exchanger cannot have access to exchange proceeds • Time Periods: • Replacement Property* must be identified within 45-Day Identification Period • Replacement Property must be acquired within 180-Day Exchange Period *Title must be held in the same name as relinquished property

16. 1031 ADDITIONAL REQUIREMENTS • Exchange must be set up (and 1031 docs signed) before title passed to buyer • To maximize deferral, replacement property must have equal or greater VALUEandEQUITY.

17. Selecting your QI • Your QI is your partner throughout the exchange • A QI handles the mandatory mechanics of a 1031 exchange for an investor.  Have following responsibility • Acquire relinquished properties from the taxpayer. • Transfer the relinquished property. • Acquire the replacement property. • Transfer the replacement property to the taxpayer

18. SUMMARY • 1031 exchanges are a great wealth accumulation vehicle. • Great way to accomplish long-term objectives • Excellent estate planning tool • Creates many opportunities to grow your business • The more you know, the more you will benefit. • 1031 sponsors.com. can help!