Accruit Blog

California to reconsider anti-1031 provisions

We recently noted that a California legislator had introduced a new bill containing short-sighted measures which would essentially eliminate a company's ability to employ 1031 like-kind exchanges (LKEs).The law was intended to generate revenue for the financially strapped state, but was certain to have the precise opposite effect, especially in the long term.

In mid-March the Federation of Exchange Accommodators (FEA) sent a letter detailing its concerns to the bill's sponsor, Assemblyman Juan Arambula. The letter was signed by Brent Abrahm (Accruit's President and CEO, acting in his official capacity as Director, President-elect & Co-Chair of the FEA State Legislative Committee) and Suzanne Goldstein Baker (Director & Chair, Federal Legislative Committee). In addition, the letter was co-signed by representatives of several important industry groups, including the Equipment Leasing and Finance Association, the National Association of Equipment Leasing Brokers, Associated Equipment Distributors and the National Equipment Finance Association.

AED Government Affairs Conference: do you have questions or concerns you'd like addressed?

Accruit President and CEO Brent Abrahm will be attending the AED Government Affairs Conference in Washington, DC on April 14-15. While there, he’ll be devoting significant attention to recent developments in the Heavy Equipment and Construction industries, as well as pressing legislative and regulatory issues pertaining to tax generally and 1031 exchanges specifically.

If you have particular concerns that you’d like Brent to address while at the conference, or if you’d like him to reach out to any of your state representatives while there, please call 866.397.1031 or contact us.

FEA, industry groups appeal to sponsor of California Assembly Bill 2640

A couple of weeks ago, we commented on California Assembly Bill 2640, noting that while the state's revenue generation goals are perfectly valid, this particular proposal would be counterproductive in a number of important ways. The Federation of Exchange Accommodators has now weighed in officially, sending a letter detailing its concerns to Assemblyman Juan Arambula, who sponsored the bill. The letter is signed by Brent Abrahm (Director, President-elect & Co-Chair of the State Legislative Committee) and Suzanne Goldstein Baker (Director & Chair, Federal Legislative Committee).

In addition, the letter is co-signed by representatives of several important industry groups, including the Equipment Leasing and Finance Association, the National Association of Equipment Leasing Brokers, Associated Equipment Distributors and the National Equipment Finance Association.

RevProc 2010-14: are you eligible? If so, how should you proceed?

On Friday, Sam Smith posted a brief note on I.R.S Revenue Procedure 2010-14.

This new RevProc offers important relief to certain taxpayers who were unable
to complete their 1031 exchanges due to default on the part of their qualified
intermediaries (QIs). I would like to offer some more detail on RevProc 2010-14,
highlighting what it takes to qualify under and apply these new safe harbor rules.

1031 exchange tips: selecting the right QI

Choosing a Qualified Intermediary (QI) is an important decision, and as such, the process shouldn't be taken lightly. After all, your QI will be guiding you through a maze of federal and state requirements as well as safeguarding the proceeds from the sale of your relinquished property. Given the potential tax consequences involved with an improperly structured exchange and the safety issues related to your proceeds, a true due diligence approach should be taken before committing to a QI.

Revenue Procedure 2010-14: IRS rules that 1031 exchange parties not in actual or constructive receipt of proceeds due to QI default

The Internal Revenue Service today issued Revenue Procedure 2010-14, providing a much-needed safe harbor for reporting gain or loss for some taxpayers. Affected parties are taxpayers who initiated 1031 like-kind exchanges (LKEs) but failed to complete the exchanges because the qualified intermediary (QI) defaulted on their obligation to acquire and transfer replacement property to the taxpayer. The IRS ruling says that if the taxpayer meets the requirements of the revenue procedure, it will not be treated as being in actual or constructive receipt of exchange proceeds due to a QI default (becoming subject to a bankruptcy or receivership proceeding). A PDF of the full IRS ruling can be downloaded here: Revenue Procedure 2010-14.

Case Study (Complex Single Exchange): Hartson Oil

Hartson Oil is an independent energy firm focused on the exploration, development, acquisition and production of domestic natural gas and crude oil. Like most companies in this industry, Hartson routinely buys and sells a variety of corporate assets, including real estate and tangible assets (vehicles, drilling and production equipment, piping and casing).

THE PROBLEM
Hartson faced a complex exchange scenario. The company planned to purchase multiple strings of tubing and casing over a period of several months and they intended to sell scrap tubing and casing sometime between the first set of purchases and the last. The exchanged equipment was to be carved out of a much larger sale and about 25% of the equipment sold wasn't going to be replaced. The replacement property was to be purchased and aggregated in four states: North Dakota, Oklahoma, Pennsylvania and Texas, with the majority of the replacement property to be parked in Texas and Oklahoma, where the bulk of the deferral was to be concentrated.

California Assembly Bill 2640: a very bad idea for the citizens of California

Legislators in the State of California have introduced a new bill aimed at generating increased tax revenue, but unfortunately this short-sighted effort would sacrifice the state's long-term economic health for short-term, destabilizing gains.

The proposed law, California Assembly Bill 2640, would essentially eliminate a company's ability to use 1031 like-kind exchanges (LKEs). However, Section 1031 of the tax code exists to promote healthy business activity, and is an especially powerful tool for small and medium-sized companies. LKEs have been a part of the tax code since 1921 and the provisions have been strengthened and expanded on multiple occasions. As such, they have been acknowledged and validated as a fair and productive practice by both major political parties and have been used to promote stronger business activity during both boom and bust cycles.

Trusts & Estates awards Accruit Exchange Manager™ near-perfect score

The Accruit Exchange Manager™ was featured in the most recent Trusts & Estates magazine's monthly technology review. The reviewer, Donald H. Kelley of Kelley, Scritsmier & Byrne, P.C., regularly covers technology and related issues for the legal publication, which is devoted to the wealth management sector.

His review considered four key criteria, and awarded the Exchange Manager™ 18 out of a possible 20 stars, concluding that "[t]he Accruit service furnishes an efficient way to handle the details of like-kind exchanges and all the associated document preparation and record keeping."

We've always touted the efficiency and effectiveness of Accruit technology, and it's rewarding to see independent analysts reaching the same conclusions.

Case Study: American Value Automotive

Accruit 1031 like-kind exchanges drive multi-million dollar benefit for major auto rental licensee...

American Value Automotive* (AVA) is a large licensee serving the western United States. Their portfolio includes light trucks and automobiles (cars comprise roughly 95% of their assets).

The Problem

AVA sells 3,000 vehicles per year, generating $72MM in revenue. The assets have a five-year MACRS life, but the average hold time is just six months. The company’s combined state and federal tax rate is approximately 40%.

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