While tax reform visions have changed the tax on profits realized from the disposition of 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 1031. This understanding will be directly applied to the structuring and audit survival of multi-party and delayed exchanges.
Upon successful completion of this course, participants will be able to:
- List tax law changes that influence exchanges.
- Cite the tax treatment of assets in each category.
- Compare exchanges with installment sales using a cost benefit analysis.
- List issues that can be resolved or facilitated by using a like-kind exchange.
- Cite the conceptual changes made to §1031 by the TRA '84, the TRA '86, the Revenue Act of 1987, and the RRA '90.
- Identify instances where the IRS may assert an unintended mandatory application of §1031.
- Cite the three elements §1031, differentiating such a transaction from a sale.
- List five excluded property types and contrast them with qualified property types, explaining how time and taxpayer intent can affect characterization.
- Differentiate §1031 from the old §1034.
- List the statutory exclusions from §1031 and identify the types of property that are specifically excepted.
- Contrast and compare 'boot' with like-kind property.
- Define taxable boot.
- Compare realized gain and recognized gain.
- Differentiate mortgage boot from property boot.
- Identify issues related to the taxation of boot.
- Identify the two basic types of property received in an exchange.
- Compare the tax treatment of nonrecognized losses under §1031 with the gain or loss treatment of any boot.
- Calculate a taxpayer's basis in acquired property.
- Name the six depreciation requirements of regulations affecting recovery periods and depreciation methods.
- Distinguish between land and depreciable improvements.
- Identify recapture provisions.
- Determine the holding period of acquired property, characterized gain, or loss recognized in an exchange.
- List ways to cash out one or more partners out as part of an exchange by a partnership.
- Identify the proper tax forms to report an exchange.
- Determine if an exchange is completely tax-deferred.
- Identify how to balance multiple party exchanges using the in and out test determining net boot.
- Identify the basic computation figures necessary to economically balance an exchange.
- Cite the mechanics of a basic two-party and three-party exchange.
- Identify the transactional flow of a traditional three-party 'Alderson' exchange.
- Compare and contrast the three-party 'Baird Publishing' exchange with an 'Alderson' exchange.
- Distinguish delayed exchanges from delayed closes.
- Identify at unresolved issues for delayed exchanges.
- Identify the purpose of a longtime exchange technique called 'warehousing.'
- Cite the procedural aspects of reverse exchanges under R.P. 2000-37.
- Compare an accommodator to an intermediary.
- Identify associated exchange complications of a sale and lease-back transaction.
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