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| Author : | Danny C Santucci, JD |
| Course Length : | Pages: 152 ||| Word Count: 73,143 ||| Review Questions: 80 ||| Final Exam Questions: 68 |
| CPE Credits : | 13.5 |
| IRS Credits : | 13 |
| Price : | $110.95 |
| Passing Score : | 70% |
| Course Type: | NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents |
| Technical Designation: | Technical |
| Primary Subject-Field Of Study: | Taxes - Taxes for Course Id 2360 |
| Description : |
While tax reform visions have changed the tax on profits realized from the disposition of real estate, investors still seek escape hatches from the capital gain tax. Tax-deferred exchanges permit the disposition of property often with the taxpayer receiving significant cash but without the payment of any tax. Functionally, an exchange is a bridge over the normally taxable event of moving from one property to another. This course alerts the practitioner to the different planning opportunities that surround exchanging. Participants will be able to identify, analyze, and handle effectively the complex tax problems that arise under 1031. This understanding will be directly applied to the structuring and audit survival of multi-party and delayed exchanges. |
| Usage Rank : | 15000 |
| Release : | 2024 |
| Version : | 1.0 |
| Prerequisites : | General understanding of federal income taxation. |
| Experience Level : | Overview |
| Additional Contents : | Complete, no additional material needed. |
| Additional Links : |
Exchange
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| Advance Preparation : | None. |
| Delivery Method : | QAS Self Study |
| Intended Participants : | Anyone needing Continuing Professional Education (CPE). |
| Revision Date : | 05-Sep-2024 |
| NASBA Course Declaration : | Participants must complete the final examination within one year of purchase and with a minimum passing grade of 70% or better to receive CPE credit unless otherwise noted on the Course History page (i.e. California Ethics must score 90% or better). After logging in click on the Course History links on your My Courses page for the Begin date and Expire date for the Final Exam. |
| Approved Audience : | NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents - 2360 |
| Keywords : | Taxes, Concepts, Mechanics, Exchanges, v14, cpe, cpa, online course |
| Learning Objectives : |
As a result of studying each assignment, you should be able to meet the objectives listed below each assignment. ASSIGNMENT SUBJECTChapter 1 Introduction - §1031 At the start of Chapter 1, participants should identify the following topics for study:
* Tax Reform Act of 1986 * Reform Act of 1997, Budget Act of 1998 & 2003 Bush Tax Act * Tax Reform of 1986 & Revenue Act of 1987 * Disposition of Installment Note * Stepped-Up Basis on Death * Related Parties * Security Issues * Exchange Benefits After reading Chapter 1, participants will be able to:
2. Recognize the differences between exchanges and installment sales and the cost benefits of each, identify several advantages given to exchanging by recent legislation and specify continuing problems that can arise with an installment sale that can act as an impetus for using an exchange. 3. Specify multiple tax benefits of exchanges and the advantages they create over installment sales. Chapter 2 Section 1031 & Its Function At the start of Chapter 2, participants should identify the following topics for study:
* Section 1031 as an exception to the general rule of taxation * Concept of tax deferral * Rationale * Continuity of investment * Administrative convenience * IRS position * Mandatory application After reading Chapter 2, participants will be able to:
2. Specify instances where the IRS may assert an unintended mandatory application of §1031. Chapter 3 Statutory Requirements & Definitions At the start of Chapter 3, participants should identify the following topics for study:
* Held for productive use or investment * Change in property’s character * State of mind concept * Same taxpayer requirement * Former statutory exclusions from §1031 * Real property restriction * Like-kind property * Former like-kind requirement for personal property * Multiple asset exchanges * Real v. personal property After reading Chapter 3, participants will be able to:
2. Identify excluded property types from qualified types by determining the meaning of “held for productive use in a trade or business” and specifying the impact of holding time. 3. Recognize the focused application of section 1031 as it applies to exchange parties and mixed-use property. 4. Specify the statutory exclusions from §1031 and the types of property specifically excepted. 5. Recognize the allowance of only real property ask qualified property in §1031 exchanges and as a consequence the importance of the definition of real property. Chapter 4 The Concept of “Boot” At the start of Chapter 4, participants should identify the following topics for study:
* Examples of boot * Realized gain * Recognized gain * Limitation on recognition of gain under §1031 * The definition of “boot” After reading Chapter 4, participants will be able to:
2. Determine taxable "boot," specify the differences between realized gain and recognized gain recalling the limitation on recognition of gain under §1031. Chapter 5 The Rules of “Boot” At the start of Chapter 5, participants should identify the following topics for study:
* Mortgage boot * Debt relief * Liability or notes created during the exchange * Netting boot – the rules of offset * Property boot given offsets any boot received * Mortgage boot given offsets mortgage boot received * Mortgage boot given does not offset property boot received * R.R. 72-456 & commissions * Net taxability of gain After reading Chapter 5, participants will be able to:
2. Identify the offset rules used to determine net boot and recognize the treatment of closing costs according to R.R. 72-456. Chapter 6 Losses in an Exchange At the start of Chapter 6, participants should identify the following topics for study:
* Losses on non-like-kind property After reading Chapter 6, participants will be able to:
Chapter 7 Basis on Tax-Deferred Exchange At the start of Chapter 7, participants should identify the following topics for study:
* Allocation of basis * Anti-churning rules After reading Chapter 7, participants will be able to:
Chapter 8 Depreciation, Cost Recovery, MACRS & Recapture At the start of Chapter 8, participants should identify the following topics for study:
* TRA ’86 & OBRA ‘93 * IRS depreciation guidance * Land v. improvements * Section 1245 & Section 1250 * Recapture property * Recapture exceptions prior to ERTA * Issues after ERTA * Allocation of basis when recapture applies * Investment credit recapture After reading Chapter 8, participants will be able to:
2. Recognize the distinction between land and depreciable improvements, and identify the recapture provisions and their impact on gain that would otherwise be recognized. Chapter 9 Miscellaneous Aspects At the start of Chapter 9, participants should identify the following topics for study:
* Treatment of gain or loss * Treatment of installment sales prior to 1980 * Treatment of installment sales after 1980 * Exchanges between related parties * Two-year limitation * Sections 267, 707, 453 and 1239 * Leverage * Splitting partners * Reporting an exchange After reading Chapter 9, participants will be able to:
2. Recognize the danger of exchanges between related parties and determine how §§267, 707, 453, and 1239 work together with §1031. 3. Specify ways to cash out one or more partners as part of an exchange by a partnership and choose the proper tax forms to report an exchange. Chapter 10 Mechanics At the start of Chapter 10, participants should identify the following topics for study:
* Components * Figures for computation * Economic balance & “evening out” * Examples of balancing multiple-party exchanges * Locating boot * Finding exchange property * Refinancing * “Coleman” solution * Wrap-around mortgage After reading Chapter 10, participants will be able to:
2. Determine how to balance multiple party exchanges using the “in and out test”, eveners, and the trade-up rule. Chapter 11 Types of Simultaneous Exchanges At the start of Chapter 11, participants should identify the following topics for study:
* Three-property-plus exchanges and variation * Three-party “Alderson” exchange and variations * Three-party “Baird Publishing” exchange and variations * Four-party “Coupe” exchange * Four-party “Mercantile Trust” exchange After reading Chapter 11, participants will be able to:
2. Determine the transactional flow of a traditional three-party exchange including variations to the format and recall procedural guidelines to ensure mechanics comply with §1031 provisions. 3. Determine the elements of a three-party “Baird Publishing” exchange, specify variations, and identify categories of four-party exchanges. Chapter 12 Non Simultaneous Delayed Exchanges At the start of Chapter 12, participants should identify the following topics for study:
* Previously used formats * Starker case * TRA ‘84 * Format & structure * Security for performance – use & control of cash * Delayed (deferred) exchange regulations * Identification requirements * Actual & constructive receipt rule * Delayed exchange agreement After reading Chapter 12, participants will be able to:
2. Recognize the requirements of the final regulations for delayed exchanges by identifying qualifying transactions, permitted intermediaries, tax treatment of interest, and use of escrow and trust accounts. Chapter 13 Warehousing & Pot Method At the start of Chapter 13, participants should identify the following topics for study:
* Reverse exchanges – R.P. 2000-37 * R.P. 2004-51 * The pot method * Escrow After reading Chapter 13, participants will be able to:
Chapter 14 Accommodators & Intermediaries At the start of Chapter 14, participants should identify the following topics for study:
* Sale & lease-back After reading Chapter 14, participants will be able to:
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| Course Contents : | Chapter 1 - Introduction - §1031 Taxes & History of Exchange Popularity ERTA & TEFRA Tax Reform Act of 1986 Later Tax Legislation Existing Capital Gains Rates Impact & Summary Exchanging vs. Installment Sales Tax Reform Act of 1986 Revenue Act of 1987 Continuing Installment Sale Problems Taxable Disposition of Installment Notes Disallowed Stepped-up Basis on Death Related Party Restrictions Security of Collateral Issues Exchange Benefits Chapter 2 - Section 1031 & Its Function Current §1031 - A Product of the ‘80s & ‘90s Code Language Section 1031 as an Exception to General Rule of Taxation Concept of Tax Deferral History of Provision Legislative Rationale Continuity of Investment Administrative Convenience IRS Position Mandatory Application Chapter 3 - Statutory Requirements and Definitions Qualified Transaction - Exchanges v. Sales Definition of an Exchange Contractual Interdependence Test Integrated Plan Test Caselaw Intent of the Parties Held for Productive Use or Investment Definition Productive Use Retired Property Investment Purpose Use by Relatives Vacation Homes Moore Decision R.P. 2008-16 Change in Property’s Character Conversion of Personal Use Property Time Pre-Existing Plans & Contracts Acquisition Purpose State of Mind Concept Focused Analysis - Taxpayer-By-Taxpayer Application Combining Qualifying Use The Ghost of Long Dead Section 1034 Same Taxpayer Requirement Caselaw & Ruling Developments Magneson Bolker LTR 199911033 Property Exclusions & Restrictions Under §1031 Real Property Only Restriction - §1031(a)(1) Disallowance of Real Property Held Primarily for Sale - §1031(a)(2) Question of Intent to Hold Primarily for Sale Dealer Status vs. Dealer Transaction Other Securities or Evidences of Indebtedness or Interest Stock In Trade or Other Property Held Primarily For Sale Stocks, Bonds, or Notes Other Securities or Evidences of Indebtedness or Interest Interests in a Partnership Existing Partnerships Final Regulations Certificates of Trust or Beneficiary Interests Choses in Action Like-Kind Property Nature or Quality of Property Personal Property - Repealed Requirements for Personal Property - Prior to 2018 Like-Kind Requirement for Personal Property Like-Kind Personal Property - Identical Like Class Personal Property - General Asset or Product Class Real (Allowed) v. Personal Property (Denied) Real Property Defined for Like-Kind Exchanges Inherently Permanent Structures: Buildings and Machinery Inherently Permanent Structures: Structural Components Unsevered Natural Products are Real Property Intangible Assets as Real Property Incidental Personal Property and Qualified Intermediaries State Law Non-property Specialty Like-Kind Rules Chapter 4 - The Concept of “Boot” Partial Tax-Deferral Examples of Boot Realized and Recognized Gain Realized Gain Recognized Gain Limitation on Recognition of Gain under §1031 The Definition of “Boot” Chapter 5 - The Rules of “Boot” Property Boot and Mortgage Boot Property Boot Mortgage Boot Debt Relief Debt Relief Is the Equivalent of Cash Liability or Notes Created During the Exchange Netting “Boot” - The Rules of Offset Property Boot Given Offsets Any Boot Received Mortgage Boot Given Offsets Mortgage Boot Received Adjustments to Mortgages During Exchange LTR 9853028 Mortgage Boot Given Does Not Offset Property Boot Received Biggs Case Behrens Case R. R. 72-456 & Commissions Non-Deductible Closing Costs Permissible Trade Down Affect on Basis Net Taxability of Gain Comment on Alternative Offset Rules Chapter 6 - Losses in an Exchange Like-Kind Property Non-Like-Kind Property Given Chapter 7 - Basis on Tax-Deferred Exchange Adjustments to Basis Allocation of Basis Anti-Churning Rules – Going, Going Almost Gone Under ERTA Under TRA ‘86 Effect Property Placed in Service Prior to 1981 Property Placed in Service from 1981 Through 1986 Chapter 8 - Depreciation, Cost Recovery, Macrs, and Recapture Depreciation Eras – ERTA, ACRS, & MACRS IRS Depreciation Guidance - Notice 2000-4 & Regs Regulations Land vs. Improvements New Allocation on Exchange Recapture of Depreciation Section 1245 Section 1250 Recapture Property Exchange Impact Recapture Exceptions Prior To ERTA §1250(d) Exception §1245 (b) Exception Issues after ERTA Issue Disappears Under MACRs Allocation of Basis When Recapture Applies Chapter 9 - Miscellaneous Exchange Aspects Holding Period Strict View Treatment of Gain or Loss Installment Sales Reporting Treatment Prior to 1980 Current Treatment Formula Definitions Exchanges Between Related Parties Two-Year Limitation Related Parties - §267(b) Special Holding Period Rule Disposition Avoidance Exception to §1031 Sections 267, 707, 453, & 1239 Leverage Splitting Partners Reporting an Exchange Schedule D & Form 4797 Form 8824 Accommodators Chapter 10 - Exchange Mechanics Analysis Meeting the Napkin Test Components Figures for Computation Economic Balance & “Evening Out” Balancing Multiple Party Exchanges Examples of Balancing Multiple Party Exchanges Locating Boot Finding Exchange Property Trade-Up Rule Exchange Groups Refinancing “Coleman” Solution Wrap-Around Mortgage Tax-Free “Cash Out” Chapter 11 - Types of Simultaneous Exchanges Two-Party Exchanges Variation #1 On Two-party Exchanges Three-Property-Plus Exchanges Variation on Three-Property Exchange Three-Party “Alderson” Exchange Variation #1 on Three-Party “Alderson” Exchange Variation #2 on a Three-Party “Alderson” Exchange Variation #3 on Three-Party “Alderson” Exchange Variation #4 on Three-Party “Alderson” Exchange Three-Party “Baird Publishing” Exchange Variation #1 on Three-Party “Baird Publishing” Exchange Variation #2 on Three-Party “Baird Publishing” Exchange Four-Party Exchanges Four-Party “Coupe” Exchange Four-Party “Mercantile Trust” Exchange Chapter 12 - Non Simultaneous Delayed Exchanges Delayed Exchange vs. Delayed Close Chaos Factor Perspective Old Simultaneous Formats The Current Rock Star - Delayed Exchanging Care in Execution Starker Case Facts Starker II Holding Analysis Codification of Delayed Exchanges 45-Day Rule Method of Identification 180-Day Rule Pre-existing Exchanges Holdover Issues after Codification Format & Structure “Starker” Trust Intermediary Format Acceptance of Notes on Exchangor’s Property Security for Performance - Use and Control of Cash Performance Deed of Trust Third-Party Guarantee or Letter of Credit Impound Interest Encumbered Property & Immediate Mortgage Relief Open Transaction Theory “Sale-in-Lieu” Provision Delayed (Deferred) Exchange Regulations Final Regulations Deferred (Delayed) Exchange Definition “Reverse-Starker” Transactions Identification Requirements Identification & Exchange Periods Application of §7503 Method of Identification Property Description Incidental Property - 15% Rule Revocation Substantial Receipt Multiple Replacement Properties Actual & Constructive Receipt Rule Four Safe Harbors Safe Harbor #1 - Security Safe Harbor #2 - Escrow Accounts & Trusts Disqualified Person Who Is An Agent? Safe Harbor #3 - Qualified Intermediary Who Is A Qualified Intermediary? Direct Deeding Assignment Simultaneous Exchanges Safe Harbor #4 - Interest Interest Reporting - §468B(g) Restrictions On Rights to Money & Other Property - “g(6)” Limitations Outside Transfers of Money or Other Property Delayed Exchange Agreement Chapter 13 - Warehousing & Pot Method Warehousing Reverse Exchanges - R.P. 2000-37 R.P. 2004-51 The Pot Method Escrow Chapter 14 - Accommodators & Intermediaries Sale & Lease-Back Appendix A - Calculation Sheets Glossary |
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