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        Featured Post

          Paul Getty   Apr 18, 2024

        Adapting to Changing Interest Rates & Inflation

        In the ever-evolving landscape of investment and real estate portfolios, 2024 presents a unique set of challenges and opportunities, particularly in the[...]

        Real Estate Investors Inflation
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        Recent Posts

        1031 Exchange

        Top Misconceptions About 1031 Exchanges

        By Paul Getty09, Jun 2022

        A 1031 “like-kind” exchange allows property investors to defer capital gains taxes on the sale of a property by reinvesting the proceeds into a replacement property. While engaging in a 1031 exchange is straightforward, some investors miss out on this opportunity due to misinformation. Here’s a look at five common misconceptions regarding a 1031 exchange.

        “Like-Kind” Means You Must Exchange for the Same Type of Property

        The term “like-kind” often confuses. However, in the eyes of the IRS, all real property located in the U.S. is considered like-kind to all other real property in the U.S. This means that you can exchange an apartment building for retail space, industrial property for farmland, a hotel for a self-storage unit, etc.

        The Sale and Purchase Must Take Place Simultaneously

        While a simultaneous 1031 exchange is possible, the most common type of 1031 exchange is a delayed exchange. This allows you 45 days from the day you sell the relinquished property to identify one or more replacement properties. You have 180 days from the day of the relinquished property sale to close on the replacement property or properties.

        All Funds from the Sale of Relinquished Property Must Be Reinvested

        You’ll need to reinvest all sales proceeds to receive a full tax deferral; however, it’s not required to complete a 1031 exchange. In fact, it’s common for investors to withhold some of the sales proceeds, using the funds for personal expenses or other purchases. In this case, the amount withheld is considered “boot” and is subject to state and federal taxes.

        A 1031 Exchange is Only for Big Investors

        Anyone who owns an investment property may be able to take advantage of a 1031 exchange. If your property’s market value is higher than its cost basis, deferring your capital gains taxes can be advantageous, even if you don’t consider yourself a “big investor.”

        1031 Exchanges Are Too Complicated

        While there are many moving parts and some strict rules you need to follow, engaging in a 1031 exchange isn’t overly complex. Working with an experienced Qualified Intermediary and your tax, investment, and legal advisors can help to make the process as seamless as possible.

        If you would like to learn more about 1031 exchanges and how they may benefit you, the team at FGG is here to help. Contact us today to schedule a consultation.

        Have you downloaded our ebook?

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        Help Save 1031 Exchanges
        Write to your Member of Congress and Senators urging them to oppose restricting Section 1031 like-kind exchanges. As part of the American Families Plan, the Biden Administration has proposed eliminating the application of Section 1031 for gains greater than $500,000. Like-kind exchanges have been part of the U.S. tax code since 1921 and are one of the tax code’s most powerful economic tools. It is critical that we all vigorously and visibly oppose this proposal. Make your voice heard with a pre-filled letter, which you can customize to add personal anecdotes or powerful client stories to highlight the positive impact of Section 1031 like-kind exchanges. Take action today by clicking HERE.

        Paul Getty

        Paul Getty is a licensed real estate broker in the state of California and Texas and has been directly involved in commercial transactions totaling over $3 billion on assets throughout the United States. His experience spans all major asset classes including retail, office, multifamily, and student, and senior housing. Paul’s transaction experience includes buy and sell side representation, sourcing and structuring of debt and equity, workouts, and asset and property management. He has worked closely with nationally prominent real estate brokerage and investment organizations including Marcus Millichap, CB Richard Ellis, JP Morgan, and Morgan Stanley among others on the firm’s numerous transactions. Paul also maintains a broad network of active buyers and sellers of commercial real estate including lenders, institutions, family office managers, and high net worth individuals. Prior to founding First Guardian Group/FGG1031, Paul was a founder and CEO of Venture Navigation, a boutique investment banking firm specializing in structuring equity investments made by institutions and high net worth individuals. He possesses over 35 years of comprehensive worldwide business management experience in environments ranging from early phase start-ups to multi-billion-dollar corporations. His track record includes participation in IPOs and successful M&A activity that has resulted in investor returns of over $700M. Paul holds an MBA in Finance from the University of Michigan, graduating with honors, and a Bachelor’s Degree in Chemistry from Wayne State University. Paul Getty holds Series 22, 62, and 63 securities licenses and is a registered financial representative with LightPath Capital Inc, member FINRA /SIPC. Paul is a noted speaker, author, and actively lectures on investments, sales, and management related topics. He is author of The 12 Magic Slides, Regulation A+: How the JOBS Act Creates Opportunities for Entrepreneurs and Investors, and Tax Deferral Strategies Utilizing the Delaware Statutory Trust (DST), available on Amazon and other retail outlets.

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        Disclaimer: There is no guarantee that any strategy will be successful or achieve investment objectives. All real estate investments have the potential to lose value during the life of the investments. This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum.

        This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This material contains information that has been obtained from sources believed to be reliable. However, FGG1031, First Guardian Group, LightPath Capital, Inc., and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies, declining market values, potential loss of entire investment principal.

        Past performance is not a guarantee of future results: potential cash flow, potential returns, and potential appreciation are not guaranteed in any way and adverse tax consequences can take effect. The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. All financed real estate investments have a potential for foreclosure. Delaware Statutory Trust (DST) investments are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments. Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions. Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits.

        IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes; therefore, you should consult your tax and legal professional for details regarding your situation.

        DST 1031 properties are only available to accredited investors (generally described as having a net worth of over one million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than five million dollars). If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney prior to considering an investment.

        First Guardian Group and LightPath Capital, Inc are separate and unaffiliated entities. Securities offered through LightPath Capital, Inc. Member FINRA / SIPC 1560 E. Southlake Blvd., Suite 100 Southlake, TX 76092 (214) 734-2957

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