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Esquire Real Estate Blog

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If you know what 1031 exchange is, you will want to read this.

Bryan Zuetel

§ 1031 New Law

For any 1031 tax-deferred exchange that occurs on or after January 1, 2014, a California taxpayer selling a California property and acquiring a “like-kind” property located outside of California must file an information return with the California Franchise Tax Board (FTB) for that taxable year and every year thereafter in which the gain or loss from the exchange has not been recognized. If a taxpayer fails to file such information return and tax returns, the FTB may propose to assess the amount of tax, interest, and penalties due by estimating net income from any available information, including the amount of gain.  (AB 92 codified as Cal. Rev. & Tax Code § 24953)

For further information, please see the following PDF with analysis from PricewaterhouseCoopers: http://goo.gl/8W9iC0.

You can follow the FTB news and promulgated guidelines, procedures, and standards for implementing the new law on the FTB website for this new law: http://goo.gl/sh7fnS.

Takeaway

It is questionable whether the law will withstand judicial review, as it appears to unduly impose an additional burden on out-of-state exchanges and favors in-state exchanges.  However, in the meantime, be prepared to submit the information return and tax returns every year if you sell a California investment property and acquire a like-kind property outside of California.  Or, simply acquire another California like-kind property.  Esquire Real Estate is available to represent and advise you regarding your sale or purchase of investment property and 1031 exchanges.

Read the small print - OR - Hire an attorney to do it for you.

Bryan Zuetel

It’s doubtful that you have ever noticed the small font language at the bottom of every California Association of Realtors (CAR) form:

NO REPRESENTATION IS MADE AS TO THE LEGAL VALIDITY OR ACCURACY OF ANY PROVISION IN ANY SPECIFIC TRANSACTION.  A REAL ESTATE BROKER IS THE PERSON QUALIFIED TO ADVISE ON REAL ESTATE TRANSACTIONS.  IF YOU DESIRE LEGAL OR TAX ADVICE, CONSULT AN APPROPRIATE PROFESSIONAL.

Esquire Real Estate offers both the services of a real estate broker to advise on real estate transactions combined with the service of an attorney to advise on legal matters.  Some of the common areas where a real estate broker should defer to the expertise of an attorney include:

·      The legal impact of liens or encumbrances against the property.

·      The advisability of contractual provisions for liquidated damages, mediation, and arbitration.

·      How to hold title to your home or property.

·      Any items noted on a preliminary title report.

·      The legal impact of removal of contingencies and the earnest money deposit.

·      Legal interpretation of any real estate transaction documents, including loan documents.

·      The legal results of failing to comply with the terms of the purchase contract or to close escrow in a timely manner.

Your Solution

If you choose Esquire Real Estate to buy or sell your California property, you won’t need to consult (and pay for) another legal professional for your real estate transactions.  Choose Esquire Real Estate offering both a real estate attorney and real estate broker in one.