1031 Exchange Definition

A 1031 exchange is a legitimate process sanctioned by the Internal Revenue Service where like-kind property is exchanged wherein the property owner, referred to as exchanger, is not liable for immediate taxation. 1031 exchanges are basically carried out for real estate transactions although other tangible and intangible properties could also qualify. The IRS requires an unbiased third party to facilitate the exchange. This party is called facilitator, qualified intermediary (QI) or accommodator.

Why Consider an Exchange?

A 1031 exchange can be a potent investment tool especially for property or business owners. This is because properties that are retailed or handed over for gain is subject to taxation, which can accrue rapidly. As the seller, you can be liable for taxes, which could reach a whopping 40% or more. In a 1031 exchange on the other hand, the property owner can keep all the property’s equity for re-investment purposes. This means that exchanger could acquire a replacement property with improved cash flow, better location and a reduction of management.

Eligibility for an Exchange

Any property held chiefly for investment purposes or for industrial use in a business may qualify as like-kind. For real estate, like-kind property basically refers to any real property found in the USA or in some of its territories. An example of a legal exchange is an apartment exchanged for an office building. Real property is not like-kind to personal property; a piece of land for instance, cannot be exchanged with an airplane.

Properties Ineligible for Exchange

Some properties are not eligible for a 1031 exchange. This was determined by the IRS when they modified the IRC 1031 in 1986. Examples of excluded properties include personal residences, stocks, notes, bonds, securities, enterprise gains, amity of a company, and other evidences of indebtedness. Also prohibited from being exchanged are properties held chiefly for sale. However, the portion of a personal residence, which is dedicated to business or investment use, may be eligible for an exchange. A home office is one example.

What are the Cornerstones of a 1031 Exchange?

1. When a property is transferred, it must not be a sale. It must be an exchange, which means that the exchanger relinquishes a property but must receive replacement property in return.

2. The properties being exchanged must be of similar classes. The relinquished property must be like-kind to the replacement property.

3. For an exchange to be completely deferred from tax, the napkin test, which is basically comparing the values of the relinquished and replacement property, must be satisfied.

4. The party renouncing the relinquished must receive the replacement property.

1031 Exchange Timeline Conditions

Yes. The exchanger has exactly 45 days gauged from the date when the relinquished property would close, to propose the potential replacement properties and 180 days to obtain the replacement property. Note that the exchange must be completed within 180 days, not 45 + 180 days.

What are the Rules for Identification?

The exchanger must provide in writing a clear description of the potential replacement property prior to midnight of the 45th day, gauged from the day the relinquished property closed. A legal description of the replacement property would suffice. Apart from that, a submitted purchase contract is also considered enough identification. Moreover, property purchased and close within the 45 days can also qualify as identification.

1031 Exchange Exceptions

It has been mentioned earlier that personal residences are excluded from being exchanged. However, vacation homes and other second homes may be eligible for 1031 exchanges depending on certain conditions defined by the Internal Revenue Service on February of 2008.

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Are you looking for a forex day trading system that works? Are you tired of blundering around in the dark and finally want a complete set of trading rules? Do you have a forex trading strategy that works?

When it comes to forex trading, one of the most popular ways to make money is through intraday trading. When you trade intraday, it can be very taxing both psychologically and emotionally.

If you do not have a complete set of rules that cover the trade from entry, stop losses and profit targets, it can be very traumatizing when you do not even understand why you are losing money. That is not even deciding on how you calculate your position size!

Trading 5 – 10 currencies, each on multiple timeframes, can cause anyone to go dizzy. Plus when you are trading intra-day, it can be taxing mentally and emotionally. Especially when you go down into the 5 minutes and 10 minute charts. One very useful way to improve your performance as a day trader is to have mechanical forex trading help.

The question is: How do you have a profitable day trading career when you have to overcome so many challenges?

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It is a simple, yet powerful day trading system. To find out more about how to day trade successfully, read my review on the 5 EMAs Forex Trading System.

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Jim Rogers was recently interviewed by The Economic Times. Among the topics covered include the recent rally in stocks, the widening deficit and his recent comments on Sri Lanka. In this interview, Jim Rogers touches on a couple of commodities that he believes will do well in this economy. As investors push oil and gold, Jim Rogers is looking at other commodities such as Silver, Cotton and Natural Gas.

If US unemployment touches the 10%-mark, it would further impact retail sales. How bad could this be for Asia?

I was trying to make a point that if anyone wants to invest in this particular part of the world, the best place would be Sri Lanka. Because it looks like the 30-year war is coming to an end.

At one stage we were inundated with gloomy forecasts, which were further reinforced by the IMF and World Bank. And then suddenly stocks surged ” something most were not prepared for. How risky is the market today?

Stocks are rising even as fiscal deficit is widening. Somewhere it has to snap

The American bond market is already beginning to go down dramatically as people realise that the American government has to sell huge amount of bonds, and secondly, there is going to be inflation, serious inflation, as it was always in the past when you had governments printing huge amounts of money.

Lets pick on China for a minute. If you sell to Wal-Mart in the US and if you are a Chinese supplier you know there is a problem. And you are going to be suffering. Any company that deals with the West is going to have problems. On the other hand, companies that are in the water-treatment business in Asia will care less if the West disappears. They are too busy making money, too busy going to work everyday.

Its going to snap. Later this year, next year, we are going to have currency problems, maybe even a currency crisis. I dont know with which currency ” maybe with the pound sterling, maybe with the US dollar, who knows. It maybe with something none of us have at the moment. When you have a currency crisis, stocks will be affected, many things will be affected. It is not sound, whats happening out there in the world.

Central banks all over the world have printed huge amounts of money, and the real economy is not strong enough for all this money to be absorbed so, its going into stocks and real assets such as commodities. Its a mistake what they are doing. Its giving short-term pleasure, but theres long-term pain as we are going to have much higher inflation, much higher interest rates and a worse economy down the road.

The American bond market is already beginning to go down dramatically as people realise that the American government has to sell huge amount of bonds, and secondly, there is going to be inflation, serious inflation, as it was always in the past when you had governments printing huge amounts of money.

If the pain comes in 2010, 2011 or 2012, there will be nobody he can blame. Especially, if things go bad later, the opposition will say, wait a minute, 2009 looked good. The next guy is going to say you did it But you are right. Its very difficult for an elected government. You have a newly-elected government in India. Whenever you have a new government they can take some of the pain.

America could have. America just had an election. The guy was elected in November and he could have come in the beginning of a four-year term and said the guys before me were hopeless idiots. They ruined things. We have to solve this problem. We have to take some pains now. But dont worry, we will get through this pain, and in two to three years or four years, things would be fine. And he could have been re-elected.

If the pain comes in 2010, 2011 or 2012, there will be nobody he can blame. Especially, if things go bad later, the opposition will say, wait a minute, 2009 looked good. The next guy is going to say you did it But you are right. Its very difficult for an elected government. You have a newly-elected government in India. Whenever you have a new government they can take some of the pain.

Throughout history, if you go to a place after the war ends you usually find everything as very cheap, everyone is demoralised, people are just depressed and there are enormous opportunities if you have energy.

In my view, investing in Sri Lanka in May 2009 is probably a better bet than Pakistan, Bangladesh, India or some of the other countries nearby. Lets hope the new Indian government does something. I have heard wonderful things from Indian politicians for 40 years.

And rarely do they produce. Its not the first time that the Congress party has been in the power. If they mean it, Indias going to be one of the greatest development stories in the next 20 years. But I dont know if they mean it.

In my view, investing in Sri Lanka in May 2009 is probably a better bet than Pakistan, Bangladesh, India or some of the other countries nearby. Lets hope the new Indian government does something. I have heard wonderful things from Indian politicians for 40 years.

And rarely do they produce. Its not the first time that the Congress party has been in the power. If they mean it, Indias going to be one of the greatest development stories in the next 20 years. But I dont know if they mean it.

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It wasnt too long ago Jim Rogers gave his thoughts on the state of the European economy and the British pound. Now, in an interview with Sky News, Jim Rogers reminds our British friends across the pond his gloomy outlook. These comments come a day after Standard and Poors revision of Britains AAA rating to a negative outlook.

It wasnt too long ago Jim Rogers gave his thoughts on the state of the European economy and the British pound. Now, in an interview with Sky News, Jim Rogers reminds our British friends across the pond his gloomy outlook. These comments come a day after Standard and Poors revision of Britains AAA rating to a negative outlook.

The US should be downgraded already if you ask me and the UK as well. Among the issues both countries face are mountain debts and the continued mistakes by politicians. Both the US and the UK unfortunately both have gigantic debts, and both sets of politicians are making mistakes, Mr. Rogers said.

Speaking to Reuters back in January, Jim Rogers had the following to say earlier in the year: “I suspect it’s going to make new lows – it may take a decade,” he told Reuters. “It’s got near parity with the dollar before…why not again? There are two big holes developing in the UK’s balance of payments — North Sea oil drying up and the financial industry. I don’t see anything replacing those two big holes.”

This has been a year in which Jim Rogers has caused much controversy in the United Kingdom when he said “the City of London is finished” and advised investors to “sell any sterling you might have.” The comments prompted an open letter from two economists at The Royal Bank of Scotland, in which they criticized his “Armageddon-esque vision of Britain” and described Mr. Rogers’ line of argument as “lacking rigour.”

Theyre pouring huge amounts of money into the economy which is going to make some things look better for some people for a while, but it wont last.

Crucially, Mr. Rogers believes the famous rating agencies are scared of revealing the dire state of American finances.

Jim Rogers said the pound could approach parity with the dollar in the coming years as the UK’s national debt increases and the economy can no longer rely on the City of London’s financial center and North Sea oil supplies for a boost.

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The rule of 72 is one of those mathematical formulas that are great because it’s so simple, yet effective in showing you the dramatic effect of compound interest.

Simply, the rule of 72 says that the approximate amount of time (in years) that your money will double is 72 divided by the interest rate (in percentage).

For example, a quick calculation tells us that our money will double in 12 years if the interest rate is 6% (72 / 6 = 12) while the same gain could be had in 9 years if the interest rate increases to 8% (72 / 8 = 9).  Here’s a graph with more examples.

2% means your money will double in 36 years while 12% means 6.  It’s no wonder why people are always hungry for a higher yield!

The rule of 72 is a nifty way of not just showing your friends that you are quick with math but also a convenient mechanism to illustrate the power of having a higher rate of return.

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