Tax-Free Swaps: Using Section 1031 Like-Kind Exchanges to Preserve Investment Net Worth
by Bradley T. Borden
A goal of most property owners is to preserve the value of their investments. Many property owners who dispose of one piece of property and acquire a similar piece of property can help accomplish that goal by doing a tax-free swap (also referred to as a tax-free exchange) under section 1031. Although many property owners and their advisors have heard of section 1031, many of them may be unaware of the requirements and scope of section 1031. This book details the potential benefits, requirements, and scope of section 1031.
Using practical examples, the book demonstrates how taxes paid on the disposition of property can erode a property owner’s net worth. It also demonstrates how doing a section 1031 exchange can help prevent that erosion. The book explains that direct swaps qualify for section 1031 tax-free treatment, and describes that section 1031 also covers, multi-party exchanges, deferred exchanges, reverse exchanges, and improvements exchanges. This book directs the reader through each of those exchange structures with real-world examples of typical exchange situations and diagrams the various exchange structures. The book also discusses related-party exchanges, exchanges of mixed-use property (i.e., property held for both business and personal use), and factors that may affect an investor’s decision to acquire a TIC interest as replacement property.
As an extensive, accessible coverage of section 1031, Professor Borden’s book will benefit
"This book is an excellent treatise on the merits and mechanics of like-kind exchanges. It will be extremely useful to taxpayers as well as to their advisors. I am pleased to recommend it."
Stanley L. Blend, Chairman of the Board, Oppenheimer, Blend, Harrison & Tate, Inc.
“Brad Borden has been referred to as "Mr. 1031"—in fact, I've called him that myself—and this book shows why. No one knows more about the practice and theory of like-kind exchanges. Brad has practiced and taught for many years; he has written widely on like-kind exchanges and many other tax issues; and he speaks regularly at conferences around the country. In short, he knows it all, and he has distilled that knowledge into Tax-Free Swaps. I can imagine no book that will provide a better introduction to
Erik M. Jensen, David L. Brennan Professor of Law, Case Western Reserve University School of Law
"Tax-Free Swaps is an excellent new treatise on like-kind exchanges. It provides the background information and sufficient details to both introduce the uninitiated to the topic and serve as a resource for professionals."
Adam Handler, Principal, PricewaterhouseCoopers, LLP
“The explosion of section 1031 activity begs for a book like Borden’s. Borden has more than succeeded in his goal of balancing “technical description with presentation” in the complicated arena of section 1031 exchanges. His highly readable and comprehensive work will bring order and comprehension to the thinking of property owners, CPAs, brokers, attorneys, and other professionals that practice in the increasingly important area of section 1031. Borden is able to translate such technical terms as improvements exchange, exchange accommodation titleholder, and non-safe harbor reverse exchange into understandable and readable prose.”
Christian Johnson, Tax Law Professor, Loyola University of Chicago School of Law, and Certified Public Accountant
“This book de-mystifies many aspects of like-kind exchanges and will meet a diverse range of educational needs. A unique contribution to the literature of like-kind exchanges.”
Kelly E. Alton, General Counsel, Nationwide Exchange Services; former Senior Technician Reviewer, Branch 5, Income Tax & Accounting Division, Office of Chief Counsel, Internal Revenue Service National Office; and principal author of Rev. Proc. 2000-37
"The tax consequences of any transaction play a significant role in business decisions. The tax-free possibilities of section 1031 are an important aspect of managing investment properties. Drawing on his extensive practical experience and work as a scholar, Professor Borden presents a sophisticated yet accessible discussion of section 1031 that will benefit both investors and advisors."
Robert J. Rhee, Associate Professor of Law, University of Maryland School of Law, and former real estate investment banker
"Tax-Free Swaps is to section 1031 exchanges what Dorothy was to the Wizard of Oz. The curtain of complexity is finally removed for property owners contemplating a section 1031 exchange and interested in learning more about tax-free swaps in plain English instead of a boring and tedious legal treatise. Tax-Free Swaps is a highly recommended read for lay persons and practitioners alike."
Alex Hamrick, MBA, JD, Vice President, Wachovia Exchange Services
"Having devoted the past 20 years to facilitating IRC section 1031 exchanges, I am pleased to see such a well-written and comprehensive work done on section 1031 exchanges. Mr. Borden's work should be a valuable resource for anyone participating in section 1031 exchanges. The in-depth coverage and attention to detail is excellent and should assist any 1031 practitioner in achieving tax-deferral strategies enabled by the use of section 1031."
Javier G. Vande Steeg, Founder and President, Asset Preservation, Inc., a 17-year-old national qualified intermediary
“Very readable and practical explanation of the essential structures for 1031 exchanges—well organized.”
Ron Platner, Senior Corporate Counsel, Olympia Management
“Section 1031 is an incredible wealth building tool. Brad details in a thorough, yet easy to understand, manner how basic and complex section 1031 exchange transactions can be implemented for both novice and sophisticated investors. He also provides insight to investors on how service providers (qualified intermediaries) operate.”
Ronald L. Raitz, CCIM, CES®, President, Real Estate Exchange Services, Inc.
"Tax practitioners will welcome Prof. Borden's book explaining the possibilities (and perils) of tax-free exchanges. Distilled from years of experience working with (and writing about) tax-free exchanges, the book offers an encyclopedic but practical treatment of the subject. Enlivened with many examples and using language comprehensible to readers who are not expert in the exchange area, the book is divided into topical segments which direct the reader to the precise type of exchange the reader seeks to structure. Each segment contains highly practical and comprehensive guidance. Moreover the book features a highly useful glossary of terms and a section referencing significant cases, revenue rulings and procedures, and publications. Those interested in the area will find it a useful work to have at hand."
Joseph E. McKinney, Tax Law Professor, Washburn University School of Law, attorney, and Certified Public Accountant
"Every Realtor should keep this book handy as a resource to help their clients save serious money in buying and selling investment property. I was thrilled to finally find a book so readable that I could finally begin to build some confidence in counseling my customers about pursuing the benefits of a 1031 exchange. I think it is each Realtor's responsibility to learn at least enough to suggest the possibilities to clients who are trusting them for advice in dealing with their life savings. I am grateful for Brad Borden's skill in providing a resource so user-friendly that even the truly untrained mind can approach complicated tax rules without fear."
Bradley T. Borden is a law professor at Washburn University School of Law, Of Counsel with the San Antonio law firm Oppenheimer, Blend, Harrison & Tate, Inc., an active member of the American Bar Association Section of Taxation, and a certified public accountant. Brad has advised clients on various aspects of section 1031, published numerous articles on tax topics in major tax and legal journals, and is a frequent speaker at tax conferences throughout the country. He is also the author of a forthcoming treatise on section 1031. He lives with his wife and daughter in Topeka, Kansas.
To learn more visit www.taxfreeswaps.com .