Real Estate Sales : Starker Exchanges Can Defer Your Tax Payment

Posted on by Robert Downey

Realty Times
The rules are complex, and the time limitations are strict, but if you plan to sell investment property, the Starker (like-kind) exchange will allow you to defer the profit you make.

Let’s take this example. In the 1970’s, you and your new spouse bought your first house for $30,000. You raised three children and in the early 1980’s, that house was just too small for your growing family.

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Real estate agent at work

You bought a larger house, but decided to keep the old residence and rent it out. It is now worth approximately $700,000.

If you sell, you will have to pay capital gains tax on the profit. For this discussion, we will ignore any improvements which you have made, although when you calculate your profit, these improvements will increase your tax basis and thus lower your tax obligations.

You have made a gross profit of $670,000 ($700,000 – 30,000). There are other costs and expenses which will reduce your profit, such as real estate commissions, legal fees, and closing costs, but for our example, these items will not be considered. The current federal tax rate is 15 percent, and thus you will owe the IRS $100,500. You may also have to pay State tax on this profit. There is a way of deferring payment of this tax, and it is known as a Like-Kind Exchange under Section 1031 of the Internal Revenue Code.

This is not a “tax-free” exchange, although that is what it is often called. It is also called a “Starker exchange” or a “deferred exchange.” It will not relieve you from the ultimate obligation to pay the capital gains tax. It will, however, allow you to defer paying that tax until you sell your last investment property.

The ideal exchange is a direct exchange. I own investment property A and you own property B (also investment). Both are of equal value. On February 1, 2006, you convey B to me and on that same day I convey property A to you. If there is a written agreement between us that this is to be a 1031 exchange, neither of us will have to immediately pay any capital gains tax on any profit we have made.

However, such a transaction is rarely possible. The logistics of finding the replacement property to be exchanged simultaneously with the relinquished property is very difficult, if not impossible to coordinate. realtors

Many years ago, a man by the name of T.J. Starker sold property in Oregon, pursuant to a “land exchange agreement,” but did not receive any money for the sale. Instead, the seller — a couple of years later — transferred replacement property to Mr. Starker. The Internal Revenue Service considered this a taxable sale, but the 9th Circuit Court of Appeals held that this was a deferred exchange which was permitted under Section 1031 of the Tax Code. In other words, the exchange did not have to take place simultaneously.

We need to talk about the ethics of having children in a warming world

Posted on by Robert Downey

In a recent Instagram live stream from her kitchen, Rep. Alexandria Ocasio-Cortez (D-NY) raised a dimension of climate change few politicians would dare to touch.

“Basically, there’s a scientific consensus that the lives of children are going to be very difficult. And it does lead, I think, young people to have a legitimate question: Is it okay to still have children?” she said.

The criticism from conservatives that followed was predictably swift and hollow. Fox News’s Steve Hilton called it “fascistic” and a “no-child policy.”

But Ocasio-Cortez was voicing a genuine concern of many young prospective parents today who can plainly see that climate change is already here and its worst effects are still to come. These anxieties are beginning to appear in pop culture — they were a major theme in the 2018 film First Reformed.

Business Insider conducted an online poll this month that found that 38 percent of Americans between the ages of 18 and 29 agreed that climate change should be a consideration in the decision to have children. For Americans between the ages of 30 and 44, 34 percent said climate change should be a factor in having children.

As we’ve learned from climate scientists in several recent bracing reports, a child born today will be living on a planet that’s likely to be dramatically warmer by the end of the century. We’ve already experienced 1 degree Celsius of average warming since preindustrial times, and we’re currently on track to reach as much as 4 degrees by 2100.

One degree of warming has already delivered rising sea levels, deadly heat waves, wetter hurricanes, droughts, costlier disasters, bigger wildfires, and more illnesses, to name a few impacts, and these effects are only going to compound. So clearly, young people have good reason to be worried, not just for themselves but for their future families.

Many also feel angry that decades of political intransigence on climate change has forced them to make such a calculation at all. “The fact that our generation has to ask these questions is politically forceful and massively fucked up,” said Meghan Kallman, a co-founder of Conceivable Future, a group that frames climate change as an issue of reproductive justice.

The discussion of whether to have children on environmental grounds quickly leads to some important fundamental questions, like what parents owe their children: Are the resources of this planet something we rightfully inherited from our ancestors, or are clean air, safe water, and a stable climate things we are borrowing from our grandchildren?

However, the conversation can also raise controversial ideas like anti-natalism, the philosophy that each birth has a negative value to society. And the idea of limiting births has historically been informed by pseudoscience and leadened with racism and classism, often brought up by the powerful as a way to limit less desirable peoples.

So for families navigating their impact on the world, it’s all the more critical to make a decision about birth that weighs philosophical, ethical, religious, and environmental concerns properly to avoid these pitfalls.

Fortunately, there’s a growing discussion about the ethics of having children, with some groups trying to help parents grapple with their concerns without pushing them in one direction or another. Instead, their goal is to encourage political action. We’re in a make-or-break era of climate change, where our current actions or lack thereof will lock us into a certain outcome. A clear vision of the stakes for our own progeny is a powerful motivator to act aggressively to limit emissions, regardless of our own verdicts on having children.

Among people who have already given this much thought, here are some of their key concerns.

The decision to have children is deeply personal, but some are now addressing it publicly
Kallman and her Conceivable Future co-founder Josephine Ferorelli have collected testimonies from people concerned about balancing their desires to build a family with their concerns for the planet. It’s a way to have a public conversation about the rational and irrational worries of having children. “The nice thing about a testimony is that it’s your own truth,” Kallman said. “It’s a very, very public way to be vulnerable.”

Witnesses say many dead, injured in shooting at New Zealand mosque

Posted on by Robert Downey

New Zealand Prime Minister Jacinda Ardern said 49 people have been killed and injured in a shooting at a mosque in the center of Christchurch, New Zealand.

New Zealand police tweeted that officers responded to a “serious ongoing firearms incident” around 1:40 p.m. Friday (8:40 p.m. Thursday ET). They said schools in the city had been placed on lockdown and urged people to stay indoors.

Nearly two hours after the initial response, police tweeted that the situation was “serious and evolving.”

“Police are responding with its full capability to manage the situation, but the risk environment remains extremely high.”

There was no official word on casualties, but witnesses said the Masjid Al Noor mosque was full for Friday afternoon prayers and many people were dead.

Witness Len Peneha told the Associated Press he saw a man dressed in black enter the mosque and then heard dozens of shots, followed by people running from the mosque in terror. Peneha, who has lived next door to the mosque for about five years, said the gunman ran outside, dropped what appeared to be a semi-automatic weapon in Peneha’s driveway, and fled before emergency services arrived.

Peneha said he went into the mosque to try and help.

“I saw dead people everywhere,” he said. “There were three in the hallway, at the door leading into the mosque, and people inside the mosque. It’s unbelievable nutty. I don’t understand how anyone could do this to these people, to anyone. It’s ridiculous.”

Zayd Blissett, chairman of the Association of Marlborough, told Stuff.co.NZ that he received a text the Federation of Islamic Associations of New Zealand (FIANZ) saying “50 shot” at the mosque.

“I’m just heartbroken,” he said. “In fact, I’m sitting here crying. This is New Zealand. This can’t happen here.”

A third witness, Mohammed Nazir, told TVNZ he saw three women shot and bleeding outside the mosque. He told police that he called the police climbed a wall to escape, leaving his shoes behind in the process.

A witness who declined to give his name told Stuff the gunman was wearing a helmet and fired more than 50 shots.

“He had a big gun and a lot of bullets and he came through and started shooting like everyone in the mosque, like everywhere, and they have to smash the door and the glass from the window and from the small door to try and get out,” he said.

The Guardian reported that police had discovered a bomb in a beige Subaru that had crashed in the center of Christchurch, approximately two miles from the mosque. The paper reported that police officers had cordoned off the street and were keeping a safe distance from the vehicle.

Christchurch, located on New Zealand’s South Island, is the third-largest city in the country with a population of just over 400,000. It was affected by a devastating earthquake in February 2011, which killed 185 people and triggered the collapse of thousands of buildings across the city.