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What the numbers say

By NORA HERRERA, for 1031idaho.com 8/25/2007

A 1031 TIC structure will allow investors to pool their resources and purchase larger, higher valued and better positioned properties than they might otherwise have access. TIC owners usually receive a proportionate share of monthly income generated from the TIC property, which are managed by professional property management companies with established track records.A 1031 tax deferred exchange is an exchange in which capital owners sell their investment, rental, business, or vacation real estate and reinvest the net proceeds in other real estate. Pre-tax: Before taxes have been deducted for the current year. While these problems are difficult to redress in the context of a normal real estate closing, when they must be dealt with under the tight time constraints of a tax-deferred exchange, they can prove disastrous.

Unlisted properties

This tax benefit is not available to large oil companies, retail petroleum marketers, or refiners that process more than 50,000 barrels per day. For example, vacant land can be exchanged for rental property. With 2% inflation, this suggests a nominal depreciation rate of about 5 1/4% per year. Minerals, royalties and overriding royalties receive revenues from the production of oil and gas from a well without paying the drilling or monthly operating expenses from the well. Some exchanges of personal property can qualify under Section 1031. It is also not available for entities owning more than 1,000 barrels of oil (or 6,000,000 cubic feet of gas) average daily production.

Conditional investment

However, for technical purposes, some people prefer to distinguish real estate, referring to the land and fixtures themselves, from real property, referring to ownership rights over real estate. The term "Net Lease" is distinguished from the term "Gross Lease". The general rule in order to have a fully deferred exchange is that the exchangor must trade equal or up in equity and equal or up in fair market value. A triple net lease (Net-Net-Net or NNN) is a lease agreement on a property where the tenant or lessee agrees to pay all real estate taxes, building insurance, and maintenance (the three 'Nets') on the property in addition to any normal fees that are expected under the agreement (rent, etc.). Agent: An entity that acts on behalf of the taxpayer.

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