Greenberg Glusker LLP’s Post

The Importance of the Settlement Statement in a 1031 Exchange #1031exchange #1031exchanges

I recently had a discussion with one of my friends who mentioned that he’s planning to purchase a property worth ₹50 Lakhs using ₹15 Lakhs in cash and the remaining ₹35 Lakhs through bank transfer. This raised an important point about the legal limitations on cash transactions in real estate, which many are unaware of. As per Section 269ST of the Income Tax Act, any cash transaction exceeding ₹2 Lakhs is prohibited. This rule applies to all types of transactions, including buying, selling, gifting, and any other transfer of property. So, in my friend's case, using ₹15 Lakhs in cash would not only violate this limit but could also result in significant penalties. Moreover, under Section 271DA, failure to comply with this restriction can lead to a penalty equal to the amount of the cash transaction. For example, if ₹15 Lakhs is paid in cash, the penalty could be ₹15 Lakhs as well. These rules are in place not just to ensure transparency but also to curb tax evasion and ensure compliance with anti-money laundering regulations. To avoid any legal or financial setbacks, it’s always best to consult with a tax advisor before making any large transactions. Understanding the law is crucial to ensuring smooth and compliant property deals. #RealEstate #IncomeTaxAct #Section269ST #Section271DA #CashTransactions #PropertyDeals #Compliance #TaxRegulations #StayInformed

If you share a bank account with a parent or relative, you may have to file a T3 return this tax season. That’s because a joint account may be considered a “bare trust.” According to new CRA trust reporting rules, these trusts are now required to file a return. Nicole Ewing, Director, Tax and Estate Planning, TD Wealth, joins Kim Parlee to provide more clarity on this issue. #TD #FinancialPlanning

If you have a joint bank account with a friend or family member, who is taxed on it isn't always clear, as technically, either one of you can probably withdraw the whole amount.  Learn more about this in my latest article for Forbes: https://lnkd.in/gS5GuHJA

Have you added your name to the legal title of your daughter’s new home to help her obtain a mortgage? Or opened an “in trust” bank or brokerage account for your grandson to help fund his education down the road? If so, you have a problem, and these are just two examples of many. Under new tax reporting rules that apply to years ending after Dec. 30, 2023, you could be liable to a penalty of up to five per cent of the fair value of the home or “in trust” account if you don’t report the arrangement, even if there isn’t a penny of tax owing. The purpose of these rules is to counter tax evasion, money laundering and other criminal activities. Their likely effect will be to put thousands of innocent Canadians on the wrong side of the law. #trust #tax

Can I take cash out during the exchange or do I have to reinvest it all? You do not need to reinvest all the proceeds, but any cash not re-invested will be taxable. This is referred to as “cash boot”. We will discuss the difference between a Partial Exchange and an Complete Exchange. Complete Exchange: If you want to defer all capital gain taxes, all the sales proceeds will need to be reinvested into a like-kind replacement property within the 1031 guidelines. This is the best way to preserve all your profits and build your wealth faster. Partial Exchange: If you receive cash or “boot” from the sale of your relinquished property, that cash is subject to capital gains tax. There are many reasons why taxpayers would opt for “boot”: an additional suitable replacement property cannot be located or the replacement property is lesser in value than the relinquished property. Executing a “complete Exchange” is ideal and if you find yourself in a situation where there may be unwanted boot, consult your advisors and Qualified intermediary before the 45 day identification period ends to review other options.   You do not need to be a customer of Northern Bank to use our Qualified Intermediary. Call our Northern 1031 today to discuss your options. 781-404-1972 or email at 1031@nbtc.com

🎓 Knowledge dump and assorted thoughts of the day: 😁 🚌 Internal Revenue Code (IRC) section 1031 exchanges remain a popular way to defer the tax bill when someone sells an investment or business real estate asset. From the most recent IRS published data, almost 250,000 exchanges are filed annually, with a total value approaching $74 billion (“Data for Like-Kind Property Exchanges, 1995–2013,”). To facilitate exchanges, section 1031 requires that taxpayers use an independent third party to create legal documents, provide compliance, and offer escrow services. This independent third party is called a 1031 exchange accommodator - or qualified intermediary (QI). This is my role in the real estate world. 😊 As with any complex tax code issue and unique real estate moving part issues - communication and documentation is very important as you progress though the 1031 exchange process. 📝 Easy to say. Harder to do. Not only does a client need to communicate to the QI the details of the exchange, but the QI must also communicate with the exchangor or the exchangor’s tax advisor. Furthermore, the exchangor often has last minute and unexpected questions for the QI during the exchange process. Every week, at least 4-5 people a week call me - people who are using the services of a competitor but who are not able to get their questions answered. I am glad to help. Many 1031 exchange companies have policies actually prohibiting thier employees from providing advice or consulting with clients. ***Most 1031 exchange companies are simply there to process paperwork for a low fee***. An IRC section 1031 like-kind exchange can be a complex process. Often you can run into unexpected road blocks. My firm’s services may cost $100-$200 dollars more than a discount competitor… but I promise you it is worth it to use Vanguard 1031 Exchange, if any bumps in the road manifest during your transaction. Let me know if you have any investment property sales in your future… and don’t want to hand over 33% to the government. Message me here, call me (858-331-1031), or use the scheduling app link in my bio. #1031exchange #taxtip #realestate

Are You a Fair Minded person who prefers Truth then please consider the following. Patriotic Millionaires want a Wealth Tax and add to that a Financial Transaction Tax and Labour can NOW CHANGE SOCIETY TO BENEFIT ALL In 2014 Simon Thorpe, a financial analyst and blogger, wrote exclusively about the need for a Financial Transaction Tax in the UK, instead Cameron and Osborne brought in Austerity, an Ideological Political Choice, and we have all seen where that has brought us to. I believe that Simon’s arguments are sound as an FTT would be a powerful tool for promoting financial stability and protecting Society. It would also generate a substantial amount of revenue that could be used to fund Public Services. https://lnkd.in/ebhwYDen Here are some of the benefits of an FTT: Reduce the risk of a Financial Crisis. Raise revenue of Billions of Pounds that could fund all Public services. Make the financial system fairer by ensuring Everyone pays their fair share. Promote long term investment that would help Economic growth and create jobs. An FTT is an effective and fair way to raise Revenue as ALL Financial Transactions are Taxed so Everyone pays their fair share relative to their expenditure. This quote is from Simon’s blog in 2014;- “In the end, as I have argued repeatedly, it looks very likely that the value of UK Financial Transactions is around 4,000 times larger that Total UK Tax Revenue. And that means an intelligent and responsible Government could effectively replace the existing Tax system with a miniscule Financial transaction tax of around 0.025%”. To enable change now in 2024 that 0.025% could be increased to 0.1% and that would hurt No Billionaire, Millionaire, Ordinary Tax Payer or Non Tax Payer and would raise between £2.5 Trillion and £3 Trillion based on an estimated £2.5 Quadrillion to £3 Quadrillion current Financial transactions in the System. All other Taxes in UK could be cancelled and so could ALL State Pensions and State benefits as a Universal Basic Income of c£1500 per month, greater than those, could be paid to ALL over 16 years of age, be they working or not. Every £ spent in the Economy would be taxed and this would Benefit ALL in Society. It just requires Bankers and Politicians to work for the Benefit of Society and for AI to be used to ensure ALL Financial Transactions are taxed at 0.1% wherever they occur in the Banking and Finance System. To Grow the Economy one needs Consumers who spend money in the Economy to have the resources to do that, be they Fair Wages or a UBI and the FTT at 0.1% would enable that. Authored by Alan Bowman. A True & Fair Party Member Previously Labour Party Member

Did you know that a 1031 Exchange Accommodator (also called a Qualified Intermediary or QI) is not just helpful, but essential for a successful 1031 exchange? Here's why: 🔑 They hold sale proceeds, keeping you compliant with IRS rules  🔑 They handle all required documentation  🔑 They ensure you meet critical deadlines  🔑 They're legally required for every 1031 exchange Without a QI, your 1031 exchange could be disqualified, leading to hefty tax bills. Choose wisely - your QI is your partner in building wealth through real estate!

Important 1031 Exchange Factors That Could Disrupt Your Transaction After spending almost a year navigating the 1031 exchange process myself, I can confidently say that I am now well-versed in all aspects of 1031 exchanges, and you can rely on my expertise. Many experienced investors are familiar with the fundamental requirements for a successful 1031 exchange, which, if executed properly, allow you to defer significant capital gains taxes. However, once you delve deeper into the process, you’ll discover there are many nuances that aren't immediately apparent. Here are some commonly overlooked details to consider. What Most People Know About 1031 Exchanges The new property must be of equal or greater value than the property being sold. You have 45 days to identify a replacement property. You have 180 days to complete the purchase of the new property. Additional Important Details Include Your Mortgage in the Sale Price: This is a detail often overlooked. If you are selling a property for $500,000 but have a $200,000 mortgage on it, you need to exchange it for a property worth at least $500,000. This likely means you will need a mortgage of at least $200,000 on the new property as well. Watch Out for the Boot: If you sell your original property for $500,000 and purchase a new property for $400,000, the $100,000 difference, known as "the boot," will be subject to capital gains tax. Ensure that the new property is equal to or greater in value than the one you're selling. The New Property Must Be in the U.S.: You cannot use a 1031 exchange to purchase a property abroad, such as in the Côte d’Azur. A Third Party Must Hold the Proceeds: All proceeds from the sale must be held in escrow by a third party. If you touch the funds at any point, you will lose all tax benefits. You Can Purchase Multiple Properties: You are allowed to identify up to three replacement properties within 45 days after the sale of your original property. There are two exceptions: You can identify more than three properties if their total value does not exceed 200% of the sales price of your original property. You can identify an unlimited number of properties as long as you eventually acquire at least 95% of their total value. Your intermediary will help you legally document your target properties. Deferred Capital Gains Disappear Upon Death: Although tax gains are deferred, they are eliminated upon your death. Your heirs inherit the property without the deferred capital gains tax obligations. Final Thoughts Ultimately, the 1031 exchange remains an excellent strategy for preserving your equity and deferring taxes. However, it’s crucial to thoroughly understand all the rules and nuances. A single mistake can nullify your tax benefits and cost you your gains.