Saturday, November 13, 2004
1031 Exchanges and Family Farmlands in the Appalachians
So many of our large acreages here in Western North Carolina have been in same-family ownership for many years. Those family names are famous around here...the Sprinkles, the Hensleys, the Carvers...the Banks Family..
These families bought acreage over a hundred+ years ago. The children, grandchildren, great-grandchildren inherited the property and it increased in value. Incredible family farmlands, gorgeous and cared for over many generations are the result.
Because of this long ownership, these lands have a very low tax basis. This means that when it comes to selling their family property, at today's appreciated prices, the Sellers will face a very large Capital Gains Tax. To offset this situation and avoid the tax bite, the family can do one of two things; put their lands into a Charitable Remainder Trust prior to sale or execute an IRC 1031 Tax Deferred Exchange.
The law states that if the Seller exchanges into another property of Like Kind for equal or greater value, and uses a Qualified Intermediary to advise and then hold transaction funds, the Seller normally does not pay any Capital Gains.
Today, we advise many of our clients who are interested in providing a land legacy to consider a 1031 Exchange and in listing and selling properties, we make sure specific language is in the Offer to Purchase and Contract and in the Listing Agreement. 1031 Like Kind Exchange rules are complex, so we act as part of a resource team in conjunction with financial and legal consultants as well as a Qualified Intermediary.
If you would like some help in finding excellent professional assistance, we are happy to refer you to people we feel certain are qualified to assist you. Please contact us at 1031Resources@janeAnne.com