DISCOVERY REALTY ADVISORS, INC.
FORT LAUDERDALE, FLORIDA

Discovery Realty Advisors Is a premier retail and office investment services firm. We serve some of the most prominent developers, property owners, institutions and private investors throughout the United States. Discovery Realty Advisors offers comprehensive real estate services centered on the specific needs of the client. Ray Kreger is the President of Discovery Realty Advisors and a professional executive. Ray has over 25 years of experience in commercial investment transactions. Ray started his career as a sales engineer for Kreger Steel Company, Inc., located in Pennsylvania and New Jersey. After becoming President, he established Tele-Data, Inc. Ray graduated Drexel University. Discovery Realty Advisors is focused on the acquisitions and dispositions of quality income-producing retail and office assets. We offer new construction and existing properties located nationwide to fit your criteria. We provide stabilized properties for investors that are completing a 1031 Exchange. A tax-deferred exchange is a transaction involving trade, business, or investment property. Its a technique for deferring gain on the sale of property by re-investing the proceeds of the sale in like-kind property. Since the economic gain has not been realized in a way that produces the cash to pay the tax, then no tax should accrue. Upon death, the basis of property gets stepped-up to fair market value and the capital gain is never taxed, which results in permanent tax savings. Those who inherit the property can sell it at fair market value at date of death and not suffer tax on that gain. If the relinquished property was held for investment or for use in a trade or business, and the replacement property will be held for similar use, a tax-deferred exchange can be affected. Virtually any real estate is like-kind to any other real estate. Personal-use property does not qualify under Section 1031. To have an exchange, both the relinquished and the replacement property must be held for investment or for use in a business. Thus, inventory is not exchangeable. If you buy to flip, there is no exchange application. This is an intent test; however, there is no minimum holding period. The most important role of the qualified intermediary is that it holds the proceeds of sale pending reinvestment in replacement property. The IRS takes the position that if the seller receives (or has direct or indirect use of or control over) the proceeds of sale, then there should be tax. By arranging for the qualified intermediary to hold the money, the taxpayer never receives the cash and therefore the transaction can be viewed as an exchange. The escrow for the replacement properties must close within 180 days from the sale date of the relinquished property. The qualified intermediary will ensure these rules are properly followed. There can be no extension of either of these time periods under any circumstance. If the 45th or 180th day falls on a Saturday, Sunday, or legal holiday, the identification and the exchange period are not extended to the next business day. The IRS regulations set strict guidelines to satisfy the identification requirement. The identification must be specific (such as the address of property or legal description). The identification is made by sending the qualified intermediary written notice of the targeted new property. One can trade into newly constructed property, but one cannot own the land on which the improvements are being built. The land must be owned by the seller, the developer, or a parking intermediary. If the taxpayer already owns the land, it can be sold to a parking intermediary or the developer. The seller or intermediary will contract to construct the improvements, and at the end of the 180-day period, can convey the property (completed or partially completed) to the taxpayer to close out the exchange. This is usually a race against the clock to try to spend as many construction dollars as is necessary to complete the trade. One cannot prepay construction costs. The transaction is taxable to the extent that the purchase price of the replacement property is less than the selling price of the relinquished property. And the transaction is taxable to the extent that there is cash left over with the qualified intermediary after the purchase of the replacement property (except that if the left-over cash is attributable to real estate tax pro-rations, security deposits, or other pro-rations on the purchase of the new property, that money can often be taken off the table without creating tax). If one trades up or evens in price and uses up all the cash, then the debt (comparing the mortgage on the old property to the mortgage on the new property), should be roughly the same or greater. If the debt goes down, there is potential tax unless more cash is put into the deal. One cannot borrow more on the replacement property as a way of trading up and taking cash out of the deal. The way to calculate this is first to figure out what the gain would have been on an outright sale. On an exchange, one can never have more gain than that. Then look to the amount of cash that was not rolled over, or the amount by which the purchase price of the new property is less than the selling of the old property. This will be the so-called boot. The gain is the lesser of the gain that one would have had on an outright sale or the amount of boot. For example, say that on an outright sale one would have had $50,000 of gain. On the exchange, there was $10,000 of cash that was not reinvested. The first $10,000 of gain is subject to tax. It is not one-fifth of the gain. The boot is taxed dollar for dollar off the top, subject to the limitation that there cannot be more exchange gain than on an outright sale. If the taxpayer sells property and deposits the exchange proceeds with a qualified intermediary in the last 179 days of the year and has a bona fide intent of doing a like-kind exchange, but the exchange does not close in the succeeding year (the 180th day must fall in the succeeding year), the gain is deferred into the succeeding year. As noted, one must have a bona fide intent to do the exchange; there are steps that a taxpayer can take with his attorney to prove that intent in advance.