GETTING IN ON THE GROUND FLOOR

Who among us would not jump at the chance to invest in Microsoft—30 years ago!  However, wishful thinking aside, we walk along the path to financial success every day, and many opportunities are presented to us.  The challenge is whether or not we can see the opportunities for what they are.

Tens of millions of dollars in equipment are bought and sold every day of the week.  This is a reason for great joy in Washington, DC, because 40% of the sales gains are paid in taxes to the Internal Revenue Service!  Aside from the fact that we know that much of this tax money is spent foolishly, each and every one of us has the chance to reduce this flow of taxes to a trickle.

When business assets are sold at a gain and if the transaction is treated as a Section 1031 exchange, then the proceeds can be used to purchase additional similar business assets and the taxes on the gain can be deferred (e.g. not paid).

Example:  A Company, who is in the business of leasing heavy duty trucks, is planning to dispose of  30 used trucks worth approximately $1,000,000.  If the Company purchases trucks for $1,000,000 within 180 days of the sale, then they can avoid paying the $400,000 of income taxes on this transaction.  These funds can be used to purchase the newly acquired trucks.  Therefore, the Company needs less debt to acquire the trucks, avoids paying income tax on this transaction, and reduces its interest expense.

What you need to know to treat your purchases and sales as a Section 1031 Exchange:

• Select an experienced Exchange Agent [also known as a Qualified Intermediary] to help guide your Company through proper implementation of your Section 1031 strategy.
• Analyze your Company’s future capital expenditures for business assets and sales.
• Discuss the implementation of the Section 1031 strategy with your lender and your Qualified Intermediary.
• The transaction must be completed within 180 days.
• Property or business assets must be identified within 45 days.
• Assets exchanged must be properly matched with certain Asset Classifications.
• A Form 8824 must be filed for every 1031 Exchange.
• Adjust your depreciation records for the 1031 Exchanges.
• Only your Qualified Intermediary can:
• sell your business assets
• touch the proceeds from the sale of assets
• purchase the replacement assets

Whether your business is selling one asset or 100 assets, Section 1031 is the effective and efficient way to structure your purchases and sales.  Let Strategic Property Exchanges, LLC help you set up a strategy to minimize your income taxes and maximize your cash flow.  Strategic Property Exchanges, LLC protects your Company against errors, mistakes, and penalties on each and every Section 1031 Exchange.