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| Business Asset Exchange Advisor | September 2008 |
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GLOBAL CREDIT CRUNCH, SECURITIZATION OF CUSTOMER LOANS AND SECTION 1031 EXCHANGES When the world gives you lemons, make lemonade. Except for those individuals sleeping under a rock, the rest of the world is becoming more and more familiar with the credit crunch and how it is affecting the economy. What was a key trigger of the credit crunch? One was the collapse of two Investment Banking Firms on Wall Street. How do Investment Banking Firms work? These are financial institutions that:
Their “loan to capital ratio” was as high as 40:1, e.g., 40 dollars of loans to 1 dollar of capital. As the pledged securities fell in value, the investment banks were forced to sell assets to raise cash to maintain their capital requirements. The more they sold, the greater the loss on the assets. How does this affect Businesses located on Main Street, USA? After all, we don’t borrow from investment banking firms. We borrow from Banks. However, Banks also have limits on the amounts they can lend, based on the amount of capital and deposits they have on hand. In the recent past, Main Street Banks multiplied the amount of loans they could make by bundling the loans they made and selling these loans to Investment Banking Firms on Wall Street. Therefore, they could re-lend the same funds again and again. The Problem. With the demise of investment banking firms, Main Street Banks will be limited in the amount and number of loans they can make. Therefore, businesses will be competing on fewer and fewer number of loans. Capital-intensive Companies need credit to grow and expand. The Solution. Section 1031 Exchanges allow businesses that are selling any type of business asset, to reinvest the proceeds from the sale into similar assets without paying income taxes on the gains. Proceed directly to GO and do not pay income taxes in today’s new version of Monopoly! In other words, a Section 1031 Exchange is the only legal and tax preferred method to recycle the cash flow of the business from the sale of assets and reduce the borrowed funds that may be required to acquire new business assets. We know that Section 1031 Exchanges are complicated. We know that it is easy to make mistakes and have to pay penalties and interest as well as taxes on a botched Exchange. That is why we have an iron clad service guarantee to protect our Customers from Errors, Mistakes, Tax penalties and Interest. We prepare your tax forms, provide a Tax Opinion and guide your staff and Advisors through the entire process from start to finish. Let us Minimize your Taxes and Maximize your Cash.
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October 15, 2008 ______________ October 29, 2008 Indianapolis, IN Advanced Section 1031 Exchanges-Event# 45618 8:30 a.m.-4:40 p.m. ______________ November 5, 2008 Advanced Section 1031 Exchanges-Event# 45201 |
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