Grand Mesa Equipment (GME) consistently maintains a positive income position and, due to consistent turnover in its rental fleet, is burdened with a substantial tax liability on the sale of these assets.
GME's leadership was presented with a strategic acquisition opportunity. As a result, an improved cash position became very important in helping them meet their business objectives. GME's tax department estimated that by implementing an LKE program, the company would realize a substantial increase of its available cash, meaning it could complete its acquisition without taking on further debt. However, after investigating the complexity involved in managing an LKE program (as well as the need to add head count to administer it internally), GME was on the verge of walking away from 1031s for good.
BY: MARY LOU SCHWAB CPA, CES
Many issues with lending can create unplanned legal or tax consequences and at times may prohibit a mortgage from being funded at closing.
Check out the following lending issues prior to your 1031 exchange transaction: