Mark Flanagan

Case Study: Grand Mesa Equipment

› Large Equipment Dealer Realizes $20M Cash Flow Boost in Six Months with Accruit 1031 Like-Kind Exchange Solution

Primary Concern
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.

Challenge
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.

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Lending Issues for 1031 Exchanges


BY: MARY LOU SCHWAB CPA, CES
February 2007

Many issues with lending can create unplanned legal or tax consequences and at times may prohibit a mortgage from being funded at closing.

These TIC purchases often require commercial bank lending. For a 100% tax deferred exchange, the exchanger needs to make sure that all of the net proceeds from the sale of their old property are utilized for the TIC purchase. Additionally, any mortgage debt paid off from the sale of their old property must be replaced. Many of the commercial lenders for these TIC purchases require the bank lending be made to a Delaware LLC entity. This creates the requirement for the 1031 exchanger to have a single member LLC for each party of the exchange.

Check out the following lending issues prior to your 1031 exchange transaction:

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