Investors - Leslie Murray

Tax-Advantaged Investments

The major national title and escrow companies offer 1031 Exchange Facilitator services and their web sites offer extensive explanations of the pros, cons, and procedure (links are listed to the right). As an introduction to 1031 Exchanges, here is the OREXCO (Old Republic Exchange Company) short description:

"The fundamental advantages of a tax deferred exchange may be utilized to diversify, consolidate or leverage your investment portfolio. With respect to real property, the broad definition of "like kind" provides investors with numerous options to accomplish their investment goals. Properties that qualify for IRC Section 1031 treatment.

IRC Section 1031 provides that to qualify for tax deferred treatment, the relinquished property must be exchanged for replacement property that is like kind. Like kind means similar in nature and character notwithstanding differences in grade or quality. The fact that any real estate involved is improved or unimproved is not material for that fact relates only to the grade or quality of the property and not its kind or class. As such, raw land held for investment may be exchanged for single-family rentals used for a trade or business or any combination of the following:

Single Family Rentals
Farms/Ranches
Office/Commercial
Motels/Hotels
Golf Courses
Some Recreational Properties
Multi Family Rentals
Raw Land
Retail/Industrial
Leasehold Interest of 30 years or more

While the definition of like kind is stricter when it comes to personal property - investors may still take advantage of tax deferred treatment in an IRC Section 1031 exchange in the sale of investment personal property. The personal property exchange can be utilized to relocate a business, to upgrade equipment, or to streamline production by replacing outdated technology and machinery with more efficient models." Read more....

Fractional Ownership

You may not yet be considering this type of real estate ownership, but as housing prices continue to increase, you may find all you can afford is a percentage of that vacation retreat you planned on, or a few weeks in the summer on the ocean. Initally devised for jet aircraft purchases, tenant-in-common fractional ownership is now extensively used in buying large motorhomes, fancy cars, and virtually any high priced investment vehicles. Fractional Ownership isn't just for vacation spots, and it isn't a timeshare. And it can be combined with a 1031 Exchange (consult your tax advisor).

Here's a good explanation of the concept from WiseGeek:

"To understand fractional ownership, consider a large, and expensive, property that may be difficult to purchase and care for on your own. Instead of becoming the sole owner of the property, you purchase a share of it, as do 15 other people. Now, you own 1/15 of the property and have others to share in the burden of maintenance and taxes. Though this option is popular with larger properties, it may be used with smaller, lower cost properties as well.

Often, people confuse fractional ownership with timeshares. Both fractional ownership and timeshare situations are common with vacation and resort-type properties. With a timeshare, however, you would purchase a specific amount of time to spend at the property, such as 3 weeks out of every year. You would not actually own any portion of the property. With fractional ownership, you would actually own the portion of the property you purchase."

And a definition from Wikipedia:

"In business, fractional ownership is a percentage share of an expensive asset. Shares are sold to individual owners. A fractional owner enjoys priorities and privileges, such as reduced rates, priority access on holidays and income sharing. Typically, a company manages the asset on behalf of the owners, who pay monthly/annual fees for the management plus variable (e.g. per-hour, per-day) use fees. For rapidly-depreciating assets, the management company may sell the asset and distribute the proceeds back to the owners, who can then claim a capital loss and optionally purchase a fraction of a new asset."

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Tax-Advantaged Investments

Fractional Ownership

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1031 Exchange Resources

Fractional Ownership Links