One of the classic laments one hears in casual conversations about finances has to do with capital gains. Clients are generally aware of the capital gains tax and frequently fear it. I've often heard clients speculate that their only real option for avoidance or deferral of capital gain involves the technique of dying with property and thereby accomplishing a step up in cost basis!
Of course, there are a lot of other options. In a number of past forums, we've explored techniques for addressing issues of long term gain in property or business.
One of the most effective techniques for capital gains tax deferral or avoidance in investment or income producing property involves the 1031 Exchange. Often described as a "like kind" exchange, the techniques can be used to substantially enhance the benefits to a client of the sale of real estate and personal property. However, it is essential to understand the technique before exploring its usefulness with the client, and the technique absolutely requires professional assistance and guidance. Basic issues involve the following:
• What is a "Qualified Intermediary"?
• What is "Boot"?
• What are the time limits for a like kind exchange?
• What sort of property can qualify for like kind treatment?
• What is a "related party" and why does it matter?
• Can condos, vacation homes and other personal residences qualify?
We at the East Side Business and Financial Forum are extremely pleased to have Attorney Michael R. Alberty, J.D., LL.M. and a Certified Exchange Specialist to guide us through the exploration of the above topics. Please join us on June 21, 2007 at 7:30 a.m., at the Grosse Pointe Yacht Club for a discussion of:
1031 EXCHANGES: WHEN "PUTTING IT OFF" IS GOOD PLANNING