1031 CORP. Newsletter: State Tax & 1031 - Caution for PA Residents

A 1031 exchange gets its name from section 1031 of the Internal Revenue Code. This tax-deferral strategy is part of the FEDERAL tax code. Whether or not you can defer the state gain varies by state.

Several states have no state income tax so there is no need to report the exchange on a state return. Other states follow the federal tax code so you can defer the state gain through your 1031 exchange. A few still have quirks that you must buy a replacement property in the same state the relinquished property was located. And then there is Pennsylvania. The Commonwealth of Pennsylvania does NOT recognize 1031 exchanges so while you will defer the federal gain, you will have to pay the Pennsylvania income tax. For PA residents who sold property (anywhere) or non-residents that sold property in PA, the 2010 tax rate for individuals is 3.07%.

In recent years, many states have implemented a mandatory non-resident withholding tax that must be paid when property is transferred to a buyer.

Bonus Depreciation for New Tangible Personal Property

Included in the Tax Act of 2010 were numerous changes related to cost recovery deductions or depreciation. For new tangible personal property placed into service between September 9, 2010 thru December 31, 2011, the new law provides for 100% bonus depreciation. This allows business owners to quickly recover the cost of capital expenditures for qualifying property in the year of acquisition. There are also changes affecting leasehold improvements, restaurant property and retail improvement property.

Estate Tax Makes a Comeback

With the new law came the return of estate taxes which were not applicable in 2010. Fortunately, the estate tax rate is lower than it has been since 1931! The top rate is now 35%, down from 45% in 2009. There is now a $5 Million exemption meaning the first $5 Million of an estate is tax-free. This exemption is up from the $3.5 Million it was in 2009. The new $5 Million level will exempt all but about 3,500 estates based on current income levels.

Learn More at TOMORROW'S Webinar!

Tax Relief Act of 2010: Estate Taxes and Depreciation Webinar

February 16th, 12:05 - 12:50 pm EST

This webinar will review the impact of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 for investors and business owners. Capital gains, depreciation and estate tax issues will be discussed by Milan D. Slak, JD, LL.M (Taxation), Esq., CPA, of Concannon, Miller & CO. P.C.

Reserve your Space Now!

Reporting your 1031 to the Tax Man

Line-by-Line Guide to IRS Form 8824

You've successfully exchanged your property for another property with the help of your facilitator. What does the IRS need to know and when?

This is general information. None of this is meant to substitute for the advice of your own tax professional.

The Form 8824 was created to help you figure out what, if any part of your exchange is taxable and what you will use as the basis of your new property. Basically, any cash or assets that are not like-kind that you give up will be subtracted from any cash, assets or benefits you receive that are not like-kind and will be currently taxable. Any gains that are not currently taxable will be subtracted from the cost of your new property when calculating its basis.

The Form 8824 will be attached to your individual, partnership, or corporate tax return for the year in which your former property is relinquished (sold, given up, transferred, exchanged).

For example, if you transfer title of a property (sell) in December 2010 and do not acquire (purchase) your new property until 2011, the Form 8824 will be attached to your 2010 tax return. If the acquisition (purchase) isn't expected to take place until after the due date of your tax return (generally March 15 for a corporation and April 15 for an individual or partnership) you may request an automatic six month extension of time to file for your corporation or yourself. Only five month extensions are granted to partnerships.

For a Complete Line by Line Review of Form 8824

Learn More at our Webinar!

Form 8824 Made Easy Webinar

Wednesday, March 16th, 12:05 - 12:50 pm

Join Susan Goldcamp as she walks through Form 8824 and helps simplify the reporting of your 1031 exchange.

Register Now!

Lunch & Learn Webinars

Join us for one of our complimentary Lunch & Learn Webinar Series webinars designed to provide quick educational sessions to help you build and preserve wealth. Grab your lunch and log on to a computer near you!

1031 Exchanges Made Easy

Thurs., March 3^rd, 12:05 - 12:50 pm EST

This webinar will provide an overview of 1031 tax-deferred exchanges and their many benefits. We'll also review the requirements of a successful exchange. Register Now!

Form 8824 Made Easy

Wed., March 16^th, 12:05 - 12:50 pm EST

It is time to report your 1031 exchange to the IRS. HELP! Susan Goldcamp, an IRS Enrolled Agent and principal of Goldcamp Tax Facts, will walk you through Form 8824 line by line. This webinar is for individuals and tax preparers and will help simplify this complicated form. Register Now!

Customized 401(k) Plans - Best Kept Secret for Business Owners

Wed., March 23^rd, 12:05 - 12:50 pm EST

Lori B. Gordon, Principal and CEO of the MandMarblestone Group LLC, will present this webinar that no business owner can afford to miss. Lori will explain how business owners can use their company retirement plan to legally favor certain individuals, such as key employees, owners and family members while shaving $20,000 off their annual personal income tax bill. Register Now!

1031 Investor Seminars

Join us at our complimentary seminar to learn more about 1031 exchanges and their many benefits. You must register in advance. Refreshments will be provided.

1031 EXCHANGES MADE EASY Tuesday, March 22nd, 6:30 - 8:30 pm

1031 CORP., 341 Tenth Avenue, Suite 200, Royersford, PA

Register Now!

To schedule a 1031 seminar or sales workshop for your group, please call Margo McDonnell, CES® at 1.800.828.1031 ext. 212 or send her an email.

Message from our President

Margo McDonnell

Dear Friends,

I am thrilled to announce that with the recent partnership between 1031 CORP. and Exchange Professionals, Bettye J. Matthews, CPA will serve as a consultant for 1031 CORP. Bettye, who is the founder and President of Exchange Professionals, will be helping us spread the great word about 1031 tax-deferred exchanges and providing many new benefits to our clients.

I encourage you to register for one of our upcoming Lunch & Learn webinars. We have been rolling out some new topics that I think you will appreciate. Tomorrow's Tax Relief Act of 2010: Estate Taxes and Depreciation webinar will discuss the 100% bonus depreciation for many assets related to your business including furniture, fixtures, equipment and many other new tangible personal property purchases. We will also discuss the changes related to the return of estate tax. You definitely will not want to miss this. Learn more or register now! Thanks to Milan D. Slak, JD, LL.M., Esq., CPA of Concannon Miller for sharing his expertise.

Enjoy our taste of Spring this week!

Best regards,