12A — October 21 - November 17, 2022 — M id A tlantic Real Estate Journal


M id A tlantic R eal E state J ournal By Eddie Rivera, CPA, MST, Sax LLP What You Need To Know Today: The Like-Kind Exchange Strategy


is to dive into where we’ve been with the 1031 like-kind exchange benefit and provide information to help you take advantage of the benefit today. 1031 Overview The history of the 1031 exchange transaction can be traced back to The Revenue Act of 1921 with the basic idea that if an investor does not receive any cash proceeds (re - ferred to as boot) from a sale of property, then there isn’t any income to tax. Throughout the ensuing decades, there have been various changes to the code and regulations. One of the more important events to shape the law was a court case commonly known as the “Starker Family Case” where the taxpayer exchanged land with a corporation in exchange for a promise to receive like-kind property in five years (or cash if not like-kind property). The IRS considered this a taxable sale; however, the taxpayer won the case and made the now com - monly used forward exchange

031 exchange (like-kind exchange) is one of the most significant tax ad -

famous – selling relinquished property and obtaining the replacement property within specified time limits. Our current statute re - stricts the replacement prop - erty identification period of a forward exchange to 45 days from closing of the re - linquished property. Also, replacement property must be acquired within 180 days from closing of the relinquished property. Evolution of the Law Since the Starker Family Case, subsequent laws, regu - lations and IRS guidance fol - lowed which includes: • Revenue Ruling 99-6 (While not directly related to 1031, the ruling details deemed asset sales on the conversion of a multi-member LLC to a single member LLC. This is a useful tool for 1031 planning around partnership structures.) • Revenue Procedure 2000- 37 (Reverse 1031 Exchanges - where you obtain title to the replacement property first

and then sell the relinquished property.) • Revenue Procedure 2002- 22 (regarding rules for TIC Exchanges) • Revenue Ruling 2004-86 (regarding rules for DST Ex - changes) • Tax Cuts and Jobs Act of 2017 (Made personal prop - erty ineligible for like-kind exchanges.) What to Know About the Law Today Many real estate inves - tors do not fully understand what qualifies today for 1031 exchange treatment. Here is a list of further defined real property that includes intan - gible assets that are eligible: • Fee ownership • Co-ownership • A leasehold interest • An option to acquire real property • An easement • Stock in a cooperative housing corporation • A license, permit, or other similar right that is solely for the use, enjoyment, or occupa -

tion of land

In Conclusion If you are contemplating selling real estate, it is impor - tant that you have a knowl - edgeable advisor in your cor - ner that can help you navigate the nuances. You should be actively speaking with your trusted advisor as there are benefits to surely take ad - vantage of and there may be changes on the horizon. Eddie Rivera, CPA, MST is a partner at Sax LLP and a member of the firm’s Real Estate Practice. MAREJ In the article “What You Need To Know Today: The Like- Kind Exchange Strategy” By Eddie Rivera, CPA, MST, Sax LLP (Mid Atlantic Real Estate Journal Volume 34, Issue 9, Sept. 23 - Oct. 20, 2022, pp 10D) there was an error in the 4th column. The editorial ran with the letter D. The follow- ing: “• A leasehold interest • An option to acquire real property ” ran incorrectly. All versions of this article have been corrected.

vant age s available to a real estate investor sell - ing a prop - erty with large real - ized gains. By imple - menting this

Eddie Rivera

tax strategy, it is possible to defer tax payments on the sale of an investment property indefinitely. While like-kind exchanges are common, there are still many complexities to navi - gate. Given some of the pro - posed legislative changes put forth by the Biden ad - ministration and members of Congress, it may make sense to accelerate transactions into the 2022 tax year. It is vital that you have experienced and knowledgeable advisors in your corner to guide you through the process. The intention of this article

A&G achieves $18.4 Million result in 21-property bankruptcy auction

undeveloped parcels zoned for commercial use. All the properties were located in towns along Maryland’s East - ern Shore, with the excep - tions of a small commercial building in Miami and an undeveloped commercial parcel in Smyrna, DE. A&G was retained to direct the asset sales by trustee Zvi Guttman and his counsel, Shapiro Sher attorney Rich- ard M. Goldberg . The assets were part of the Chapter 11 bankruptcy of Brodie Holdings LLC (Case No. 21-16309-TJC) and related entities filed in The U.S. Bankruptcy Court for the District of Maryland (Baltimore Division). During an August 18 hear - ing, U.S. Bankruptcy Court Judge Thomas J. Catliota lauded A&G’s three-month execution of the portfolio sale, describing the process as “well- run” and noting its tight time - table. A&G, the judge said, executed “a very thorough mar - keting effort to create a market when there was a need to act very quickly … the process has been greatly successful in the view of the Trustee and his pro - fessionals, and it seems to me that is exactly correct.” MAREJ

MELVILLE, NY — In a sale process described by a federal judge as “well-run” and “greatly successful,” A&G Real Estate Partners has sold 21 properties in Maryland, Delaware and Florida—all as - sets formerly owned by the late Zebulon J. and Beatrice Brodie. In the August 16 bankruptcy auction, 19 properties in Mary - land and one each in Delaware and Florida fetched a total of $18.4 million. Highlights included: The $6.7 million sale to differ - ent buyers of four contiguous, largely undeveloped properties in a busy commercial district on Legion Rd. in Denton, MD. The $1.5 million sale of the Carter Building at 300 Market St. in downtown Denton. The $2.05 million sale of the Alexander Building at 315 High St. in Chestertown, MD. The $2.2 million sale of 300 Bulle Rock Farm Lane in Centreville, MD—a family compound formerly owned by John J. Raskob, builder of the Empire State Building. “A&G’s comprehensive marketing campaign for this middle-market disposition triggered inquiries from more than 560 prospective buyers

This massive equestrian building was a key component of the waterside family compound in Centreville, Md. which sold for $2.2 million. (Brodie-estate barn)

Maryland’s Eastern Shore. In addition to the retail, warehouse/industrial, mixed- use and office properties sold at auction, the Brodie portfolio included a waterside family compound at 300 Bulle Rock Farm Lane in Centrev - ille. The 28.85-acre property boasts a massive equestrian building with a riding area, stalls and an observation platform. It was built in 1929, with a main house, pool and guest cottage. Buyers acquired nine in - come-producing sites in the auction along with various

creditors of more than 50% over baseline, or $6.3 million. “It was another entertain - ing auction for a diverse group of engaged bidders, including investors, commercial tenants and even local residents look - ing to buy residential homes,” Amendola said. “Competition creates value, and that’s exactly what hap - pened during this sale process” A developer and philan - thropist, Zebulon J. Brodie founded South Shore Hos - pital in Miami and owned buildings, shopping centers and other businesses across

across the country, and nearly 50 of those interested parties eventually placed baseline, qualifying and/or prevailing bids, some for multiple prop - erties,” said A&G co-president Emilio Amendola , who heads the New York-based firm’s real estate sales division. After two rounds of intense bidding, 13 different buyers secured properties at auction. When the final gavel hit, 20 of the 21 properties received higher bids than the initial baseline offering. All told, the sale sparked 77 qualified bids and created a gain for the

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