When is Pro Forma Performed by a Real Estate Investor?
Pro Forma is a term that pops up in real estate investing and other business discussions. Regarding real estate, a Pro Forma is typically thought of as a forward-looking estimate of financial opportunity. As a result, many real estate investors review the Pro Forma documentation to analyze the value of a potential acquisition.
What is a Simultaneous 1031 Exchange?
Timing is a crucial element throughout the 1031 exchange process.
What is the Interest Rate on a Reverse Mortgage?
Reverse mortgages are a financial tool that has enjoyed an increase in popularity in recent years. There are at least three good reasons for this surge. First, people are living longer. Even with the impact of the Covid-19 pandemic, Americans are living longer than ever, and that trend is likely to continue. Second, for many people, their residence is their most significant asset. Finally, as the prevalence of defined benefit pensions has declined, more retirees need income to supplement their Social Security benefits and other sources.
How to Calculate Deferred Tax Liability
A deferred tax liability can occur when there is a timing difference between two different depreciation schedules. A business may choose straight-line depreciation (for asset book value) each year but bases its tax depreciation on the accelerated method. This will create a difference each year between the two schedules.
Who Holds the Proceeds in a 1031 Exchange?
In a 1031 exchange, the investor typically works with a qualified intermediary (QI), also known as a facilitator, who acts as a neutral third party to facilitate the exchange. The QI plays a crucial role in the exchange process, as they hold the proceeds from the sale of the relinquished property and facilitate the purchase of the replacement property.
Can You Refinance a Fixed Rate Mortgage?
The mortgage industry is volatile at almost any time, whether rates are increasing or falling. When rates are lower, homeowners are more likely to consider refinancing their mortgage loan to take advantage of lower payments. Consumers may be more attracted to adjustable-rate products when the rates rise. CNBC reported that refinancing applications in February 2023 were 76 percent lower than in the same week in 2022.1
How Often Does the IRS Audit 1031 Exchanges?
The 26 U.S. Code § 1031 – aka the 1031 exchange or like-kind exchange – can be a good strategy to help defer capital gains taxes on the sale of real property. But as mentioned in a previous blog, very stringent rules exist when it comes to conducting this type of exchange. Playing fast and loose with in-stone deadlines, property values, or other factors could wave a red flag at the IRS.
How is a Taxable Gain on an Installment Sale Taxed?
Installment sales have favorable tax treatment, making them attractive for certain sellers. Rather than receiving proceeds from the sale of an investment property at once, the seller receives payments over time. For those who value tax benefits over the immediate need for cash, an installment sale can work in their favor.
Does a Tenancy in Common Need to Be Filed in Court?
Many legal structures exist when it comes to real estate ownership. There’s sole ownership, joint tenancy, partnerships, and corporations, just to name a few. Then there is tenancy-in-common, sometimes known as tenants-in-common.
Does a 1031 Exchange Need to Be in the Same Name?
When we discuss the specific provisions governing the execution of a 1031 exchange, sometimes we neglect to mention that the reason the IRS allows this transaction is in recognition of the ongoing nature of the investment. This fact is worth considering since the IRS created some rules to test that status. For example, the deadlines for identifying the replacement property and consummating the acquisition can demonstrate that the taxpayer is traveling down a path rather than completing one investment and engaging in another. Similarly, the limitation on eligibility to “like-kind” investments is a testament to the ongoing endeavor. The IRS further upholds this condition by requiring the taxpayer's identity to remain the same.
