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Q&A: Taxes And Exchanges

Q .We are making a tax deferred exchange of our commercial property up into a large apartment property. The apartments have some deferred maintenance so we would like to take some cash - about $40,000 - out of the transaction for some upgrades. My accountant now tells me that any money taken out of the transaction will be taxable to me. Is this true?

Everyone Wants Apartments

Of the housing starts and new building permits in recent quarters, apartments outnumbered single-family homes. The demand for rentals remains very strong. Owners of foreclosed homes have added to the demand, moving from homes to apartments. Although most people favor detached home ownership, many in the population cannot afford a single-family home.

Controlling Property With The Least Expense

The Purchase-Option A purchase-option contract lets the buyer-optionee purchase a property at a specific price within a certain period of time. If the option is exercised, a closing is held and the property is purchased at the price previously agreed upon. There is no legal obligation to buy the property. But, if the optionee does not exercise the option, the deposit paid to the seller-optionor is forfeited.

Securing Land For Any Project

Land is always at the top of investments by real estate professionals. Before any building project can be planned, the land must be available. At all times, real estate assemblers are looking at and acquiring under-utilized sites within cities or in suburbs. Here are some ideas on how those professionals do it. A thorough knowledge. Only purchase or option property in well-known localities to reduce the risk of unexpected surprises. If the locality is not familiar, seek out local professionals for their opinions.

Postponement Of Federal Taxes

The Internal Revenue Code contains two provisions that permit the postponement of tax on the exchange of business or income real estate. Even though the term “tax-free exchange” is commonly used to describe such exchanges, tax merely is deferred on such exchanges until the chain of exchange cycle is broken by a sale. The only exception occurs when the exchange cycle is unbroken throughout the investor’s lifetime, in which case the real estate receives a stepped-up basis upon the death of the taxpayer so that no tax is ever payable on the appreciation to that date.

Combining Build-To-Suit With A Tax-Free Exchange

There is a great deal of control that can be exercised over the type of property to be received in a tax-free exchange. In one case, the taxpayer designed a brand-new building for himself to replace property to be given by him in exchange. In addition, the taxpayer provided financing for the new building's construction

Choosing The Right Investment Property

No single property can fit all of the investment goals and rules an investor has set. Even if the investor tried to build a property to specifications, he would find some things "not quite right." The investor is, therefore, wise to anticipate problems and have some basic strategies for dealing with them. Here are some suggestions to help the investor devise other approaches to meet special needs:

Upgrade In Office Design

Key executives were the ones who always had the "office with a view." Now, however, on modern buildings built in the past ten years the atrium is now one of the most popular (and expensive) amenities. It is popular because virtually every office can have a window view, either toward the conventional view, the outdoors, or toward the spaciousness and openness provided by the atrium. It is an example of "keeping key employees happy".

Profits From Investing In Land

Land is always a good investment for the long term. With prices down in the recession, land might be better now.

Losing Money in Commercial Real Estate? It Could Be A Good Investment

Real estate activity is picking up throughout the country. Commercial real estate has been less affected than the loan problems in homes. If fact, apartments have benefited. But in investment properties, when cash expenses are more than cash receipts, there is negative cash flow. Most investors avoid properties where this is the situation, unless there are strong underlying economic factors that indicate the cash flow can become positive.

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