After a successful racing career, a horse named Ronnie's Revenger was retired for stud duty. As his offspring began winning races, the horse quickly became one of the most talked about young sires in the industry. Within several years, the stallion began commanding stud fees in excess of $100,000. Moneymaker Farms decided to divide ownership of the stallion into 20 fractional, undivided interests or shares. The owners retained 11 of the shares and began marketing the remaining nine, each of which was offered for $2 million. The owners of the farm were concerned with the amount of tax gain that they would recognize upon the sale of each share. After consulting with their controller, they realized that every share sale would generate over $700,000 in tax.
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.
1031 Exchanges help California construction companies go “Green” and save a little green in the process.
Accruit is seeing more and more California construction companies utilizing 1031 exchanges to sell off old equipment. These outdated assets don't meet California's strict new emissions laws so companies are buying new, greener replacement equipment.Everyone agrees that going green is good for the environment, but the cost of doing so can take a bite out of a company's bottom line. For example, if a demolition company sells just one fully depreciated loader for $60,000, they're going to owe the IRS approximately $21,000 in taxes.