Appraisers' Free Forum

Many of our seasoned veterans have appraised property for 1031 exchanges. I haven't, and had no clue how such an exchange works or why one would want to do that. The following article from Realty Times gives a brief outline of how such an exchange is executed, and some of the pitfalls to which someone engaging in one can fall prey. It's an easy read, and it makes me glad we've got lawyers and CPA's to sort all this stuff out.

http://realtytimes.com/rtpages/20080107 ... change.htm

Jim, thank you so much for posting this! I understand the process a whole lot better now.

the 1031 exchange has been around for years; it has grown more complex because....some cleaver sucka's have tried to get around some of the Rules, naturally.

If used in it's benefit oriented writting it came become a useful tool in the Real Estate business; someone will always try to outsmart the IRS, but hey, Rulkes were made to be broken, some just don't understand the consequences.

Thanks for posting this. I thought I pretty much knew about the 1031, but this was a great refresher article. Very concise.

The big question in my mind, whenever I have seen a sale that was noted as a 1031 exchange, was what effect on value did the 1031 have? So far, in the ones I have seen, I have not been able to isolate that there was much of an effect. Has anyone else been able to quantify this?

Steven

I think it would be difficult from the point of not being "privy" to the complexity of the deal; there are several aspects that can be utilized, so it becomes a complex item as soon as you step away from; the like / kind & quality issue - very simple to do. The advantages far outweigh disadvantages, so if you know what you are seeking it becomes a more useful tool; Builders can use them to great advantage in markets similar to the one we're in now, swapping old for new plus capital and take the tax advantage.

Again, it depends on what you end result is that you are seeking....good luck and pre-arrange your CPA & Attorney so that you are sure they fully understand what your attempting to accomplish.

So far, in the ones I have seen, I have not been able to isolate that there was much of an effect. Has anyone else been able to quantify this?

I used to not see it as a problem, but about 3-4 years ago when the developers got to paying farmers $25,000 an acre for land, the exchanges were being made with land on the other side of the county. We saw some land sales of $5000 - 7000 per acre. Now that has fell off to $3000 or so per acre. The idea being, that it would save taxes. In some cases it would have been just as wise to pay the tax and find cheaper land.