Trust Your Exchange to a Certified Exchange Specialist®

Why is it important to have a Certified Exchange Specialist® (CES®) manage your IRC Section 1031 exchange? Currently, due to lack of regulation, almost anyone is legally permitted to act as a Qualified Intermediary (QI) to facilitate a 1031 Exchange. The Federation of Exchange Accommodators (FEA) has addressed this issue by establishing a Certification and Continuing Education Program.

The Certification is available only to FEA members who meet specific criteria. CES® Designees are required to have three full time years of experience before sitting for the exam. This full time experience must include substantial time spent counseling taxpayers and their advisors (e.g., attorneys, accountants and real estate professionals). They must attend 20 hours of continuing education to maintain their designation. Designees are required to adhere to a strict Code of Ethics enforced by the FEA.

The purposes, as provided from the Federation of Exchange Accommodators), of the CES® certification program are to:

Establish nationally recognized standards of knowledge and experience for exchange specialists;

Assess the level of knowledge demonstrated by exchange specialists in a valid and reliable manner;

Encourage professional development in the exchange accommodation field;

Formally recognize individuals who meet the requirements set by FEA; and

Serve the public by encouraging quality Section 1031 exchange services.

Mary Foster, CES® and former President of FEA has stated, “The sign of a Certified Exchange Specialist® shows a commitment to knowledge and continued education that is difficult to achieve. As with other professions, the CES® is a must-have if consumers are looking for a QI who handles their business with the highest level of professionalism available.”

1031 Corporation has four Certified Exchange Specialists® on staff ready to meet your 1031 exchange needs. If you have questions about a 1031 exchange you are considering, call one of them today at 888-367-1031.

Federal Foreclosure Prevention Plan Summary

Yesterday, President Obama announced a extensive foreclosure prevention plan. The plan is in addition to the $787 billion economic stimulus bill Obama signed on Tuesday, the Financial Stability Plan the Treasury department announced last week, the mortgage bankruptcy “cram-down” bill currently being discussed, and any other regulatory restructuring that is being contemplated by Congress and the Obama administration.

Homeowner Stability Initiative:
The plan calls for a $75 billion partnership between government and lenders to share the costs of modifying certain at-risk loans. Banks would reduce a borrower’s loan amount to 38% of their monthly income. The government would match additional reductions until the monthly payments equal 31% of monthly income.

Lenders participating would receive incentives for completing modification. Borrowers that are able to stay current would receive balance deductions within the first five years are included in the plan.

Partial Guarantee Program through FDIC:
The plan calls for $10 billion to be spent to provide up to 50% guarantee on loans that received an approved modification, depreciated in value and saw the borrower default. The goal is to discourage lenders from foreclosing quickly on loans that are at risk of depreciating further.

Government Sponsored Enterprise-based refinancing:
Currently Fannie and Freddie can’t refinance any loans that have less that 20% equity. The government will loosen the refinancing requirements of GSEs allowing them to refinance loans that they either hold or guarantee, as long as the balance does not exceed 105% of the current home value. The administration projects this will help three to four million borrowers. GSE's would receive an additional $100 billion over the September 2008 figure to complete this refinancing plan.

Increase in GSE portfolio:
Treasury also will permit Freddie and Fannie to increase the size of their portfolios by $50 billion from to $900 billion.

Only property used as a primary residence would be eligible for assistance. Obama’s proposal relies heavily on bank participation and some skepticism exists whether borrowers who are out of work and behind on payments can be saved. There is also skepticism as to why someone who is upside down on value with no equity and a past due mortgage would want to work out versus simply giving it back to the bank and walking away.

Additional specifics and technical details are expected to be announced on March 4th and it will be interesting to see whether this plan will work or if it is simply throwing good money after bad.

Alternative Minimum Tax (AMT) Patch in 2009 Recovery Act

The Alternative Minimum Tax (AMT), which began back in 1969, is a parallel tax system that was created to make sure taxpayers in the highest tax brackets weren't able to skip through the tax system. But because of a lack of adjustment over the years, this tax now reaches far deeper than the 155 individuals it was targeted at back in 1969. It is estimated that if changes are not made, it will expose 30 million taxpaers in 2010. Instead of comprehensively dealing with this, it appears we are now stuck in a year-to-year patch that doesn't really address the overall issue of the AMT.

So, what is it? The Alternative Minimum Tax is a tentative minimum tax for the year over the regular tax for the year. In arriving at the tentative minimum tax, an individual begins with taxable income, modifies it with various adjustments and preferences, and then subtracts an exemption amount (which phases out at higher income levels). The result is alternative minimum taxable income (AMTI), which is subject to an AMT tax rate of 26% or 28%. The Alternative Minimum Tax (AMT) is the amount by which the tentative minimum tax exceeds the regular income tax.

In 2008, the AMT patch passed last year created an exemption of $46,200 for unmarried individuals; $69,950 for married couples filing jointly and surviving spouses; and $34,975 for marrieds filing separately. The Recovery Act of 2009 being considered no will "patch" AMT for another year (otherwise the AMT exemption amounts would decrease to much lower year 2000 levels). The Recovery Act makes no change in the AMT phaseout rules.

So for 2009, the AMT exemption amounts for individuals are: married individuals filing jointly and surviving spouses, $70,950, less 25% of alternative minimum taxable income (AMTI) exceeding $150,000 with zero exemption being reached when AMTI is $433,800; unmarried individuals, $46,700, less 25% of AMTI exceeding $112,500 (zero exemption when AMTI is $299,300); and married individuals filing separately, $35,475 less 25% of AMTI exceeding $75,000 (zero exemption when AMTI is $216,900).

Absent any permanent fix by Congress, the 2010 AMT exemption amounts for taxpayers will revert to the levels they were at for 2000. The one-year Recovery Act AMT “patch” has the effect of postponing, for yet another one year period, the exemption reductions that were scheduled to go into effect for 2009. Unless something substantial is done, 30,000,000 taxpayers and nearly every married couple making more than $75,000 will find themselves subject to the AMT in 2010. This sure is a far cry from the original intent of capturing 151 individuals who made over $200,000 in 1969 - the inflation-adjusted equivalent of $1,157,629 in 2008.

IRS Form 8824 worksheet

If you've ever completed an exchange, you know how difficult it can be to complete the IRS 8824 Like Kind Exchange form. You may have searched high and low, tried unsuccessfully to use a couple worksheets and even read all the instructions in the IRS publication but still had difficulty figuring out the form and what goes where.

Well, we are here to help. Larry Jensen, 1031 Corporation's accounting professional with more than 25 years CPA partner experience and 18 years experience in the 1031 industry, has created an incredibly helpful 8824 worksheet that can assist you or your tax professional in preparing the Form 8824. You can find the form by clicking on that previous underlined link.

Of course if you have questions about the worksheet or a question about completing your like kind exchange reporting, feel free to give us a call at 888-367-1031. The phone call is free and the complimentary guidance he can provide might prove invaluable. Just remember to use 1031 Corporation Exchange Professionals next time....the instructions, worksheet and all your reporting requirements come neatly bound after your exchange is complete. Sure makes tax time a lot easier for you and your accounting professional!

Oh, one more thing....if you haven't already done so...tomorrow is not only Saturday, it's Valentine's Day....don't forget your honey. If you do forget, well...we can't help you out with that!

What does 1031 Corporation do for You?

1031 Corporation facilitates 1031 exchanges by acting as a Qualified Intermediary. We work directly with real estate agents, attorneys, and tax professionals to provide consultation and guidance throughout the exchange process.

We prepare all documents that the IRS requires in completing an exchange. This includes the Exchange Agreement, Assignment of Contract and Notice of Assignment of Contract. Documents are prepared before the sale of the relinquished property and before the purchase of the replacement property. We provide a form to comply with the identification requirements that the IRS has defined and follow up to make sure the deadlines are met.

The exchange proceeds are banked in segregated accounts for the benefit of the exchange client at FirstBank. We have the ability to provide FDIC insurance up to $6.5 million by using separate accounts within the FirstBank charters. Our clients earn money market interest rates on the exchange proceeds.
Upon completion of the exchange, we provide our clients with a summary of the exchange. The summary includes copies of all documents and worksheets to assist with completing Form 8824. We have a CPA on staff to assist with any exchange related tax questions.

Choose 1031 Corporation. We have the knowledge and expertise to help clients defer capital gains tax and we provide exceptional customer service in the process!