Commercial Real Estate
Our Commercial Real Estate Group establishes a strong bond with our clients by treating their issues as our own and embedding ourselves with our clients’ businesses. We cater to various real estate matters which include acquisitions and dispositions, joint venture transactions, commercial leasing, and debt and equity financing.
We are proud of our client-centric approach, expertise, and proficiency in resolving legal issues and getting your transactions to the finish line. We value our clients' experiences as a genuine measure of our success.
Frequently asked Questions
A 1031 Exchange (also called a Starker Exchange or Like-Kind Exchange) is a valuable tax planning procedure that, if properly and strictly followed, allows the owner of real estate investment property to sell the property with accumulated capital gains and then buy a “like-kind” property while deferring/postponing capital gains tax.
When you consider selling your investment property, to the extent that property has increased substantially in value from the time you acquired it, you should think if you want to defer or pay taxes following the sale. Any forward-thinking investor would consider investing more rather than paying as much as 40% in taxes. It is a powerful investment strategy as well as an estate planning tool the investor can continuously use deferring capital gains on the investment properties until death, potentially avoiding them all together.
For example, we recently represented an owner of a commercial property that had been in his family for decades and had close to zero cost basis. The neighborhood in which this property was located had seen exponential increases in value, and a developer made him an “offer he couldn’t refuse.” However, our client was concerned about paying millions in capital gains taxes and having no guarantied income on which to live. With our help, he utilized both a 1031 exchange and creative estate planning techniques to defer these gains and eventually pass them on to his heirs, who would enjoy a step up in basis upon their inheritance and effectively “wipe out” these gains. Moreover, he “exchanged” his property for 2 very safe “triple net” leases with national tenants, essentially giving him a 20-year income stream, hands free ownership and the ability to “cash out” later with refinancing, for additional, tax-free proceeds
For assistance with your estate planning needs, please contact Jotkus Law Group
The Simultaneous Exchange. Real Time Exchange.
In a simultaneous exchange, the property you sell (“Relinquished Property”) and the new property you buy (“Replacement Property”) are transferred simultaneously between two parties. This type of exchange is not very common.
The Delayed Exchange. Sell today – exchange within 180 days.
The most common exchange structure is when the Relinquished Property is sold, the proceeds are delivered to an independent third party, known as a Qualified Intermediary and those proceeds are subsequently used to purchase the Replacement Property from a third party.
The Build-to-Suit Exchange. Sell – Improve – Buy.
The build-to-suit exchange, known as construction or improvement exchange, gives the opportunity to use the funds from the sale (“Exchange Funds”) for construction, renovations or new improvements to the Replacement Property. This type of exchange is more complex as well as costly.
The Reverse Exchange. Buy today – Sell within 180 days.
A “reverse” exchange occurs when you purchase the Replacement Property before transferring the Relinquished Property. While a valuable tool, this type of exchange requires that the Seller has cash to buy the Replacement Property before selling the Relinquished Property.
For assistance with your estate planning needs, please contact Jotkus Law Group
To receive the full benefit of a 1031 exchange, your replacement property should be a like-kind property of equal or greater value (or you risk recognizing “boot”). A like-kind property is a property of the same nature, character or class regardless of quality or grade. The IRS is very liberal in this interpretation and allows the exchange of an apartment building for raw land, or a ranch for a strip mall, for example. In other words, as long as you exchange real property for real property, that satisfies the “like kind” test.
You must identify a Replacement Property within 45 days after the sale of the Relinquished Property and then conclude the purchase of the Replacement Property within 180 days after the initial sale. Of note, there are additional rules that allow the purchases of more than one property identified and purchased that are beyond the scope of this article.
The properties involved on both ends of the exchange must be “investment or business” property, not personal property or primary residences. In addition, the Seller of the Relinquished Property must be the same tax-payer as the buyer of the Replacement Property. However, there is an exception with respect to single member limited liability companies as long as the sole member is the same.
If you plan to do an exchange, you should let your attorney know so that the “Exchange Cooperation Clause” is included in the purchase and sale agreement. And most importantly, you must use a Qualified Intermediary, which is essential to completing a successful the exchange. Although the process is relatively simple, the rules are complicated and filled with potential pitfalls.
For assistance with your estate planning needs, please contact Jotkus Law Group
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Finding a good lawyer, that is looking Out for you and is there when you need him is not easy . Alena is very knowledgeable, honest and trustworthy person. She is handling all my real estate Contracts and did my estate trust planning. I highly recommend you guys trying her out.