<p>The team at Accruit is&nbsp;pleased to&nbsp;continue rapid growth plans by adding David Gorenberg as Managing Director.&nbsp;An attorney by trade, David has spent 20 years of his career in the 1031 like-kind exchange industry and is a Certified Exchange Specialist®. David is joining Accruit from Wilmington Trust, where he served as the Vice President and Product Leader for Wilmington Trust 1031 Exchange, LLC out of Wilmington, DE. Prior to that, he spent six years with Citibank’s 1031 operations.</p>

<blockquote>
<p>“When it came time to relocate my 1031 exchange practice, I wanted to join an industry leader. I've known Brent and other members of the Accruit team for years, and I'm thrilled to be joining such a highly respected firm," says David Gorenberg.</p>
</blockquote>

<p>As part of Accruit’s commitment to strategic growth, David was selected from top industry professionals to join Accruit’s team of subject matter experts. David is past President of the Federation of Exchange Accommodations (FEA), making Accruit <strong>the only QI in the country to boast three past FEA presidents </strong>on staff at one time.&nbsp;David joins colleagues Max A. Hansen and Martin S. Edwards, creating a triumvirate of 1031 expertise here at Accruit. With David's addition, the collective experience at Accruit now exceeds 150 years working in the industry.&nbsp;</p>

<blockquote>
<p>“Having served with David on the FEA Board for numerous years, I experienced first-hand how David helped shape our industry. Now, we are fortunate to add him to our team,” says Brent Abrahm, President &amp; CEO of Accruit. “This gives our company a significant presence coast to coast.”</p>
</blockquote>

<p>David is active in public speaking and business development opportunities as they relate to 1031 exchange transactions, Tenant-In-Common (TIC) and Delaware Statutory Trust (DST) properties. David spends a significant portion of his time presenting continuing education classes to accountants, attorneys, financial planners, real estate brokers, and investors nationwide.</p>

<p>With offices in Denver, Chicago, Dallas, and Dillon, MT, Accruit adds a presence on the east coast with the addition of Gorenberg, who will be based out of Philadelphia, PA.</p>

<p>When he's not helping clients with exchanges, David can be found at a marching band festival, gathering trivia, or spending time with his family.&nbsp;</p>

<p>Accruit has previously provided a summary of the rules pertaining to extensions of exchange transactions <a href="https://www.accruit.com/blog/how-federally-declared-disasters-affect-10…; target="_blank">due to federally declared disasters</a>.</p>

<p>The IRS issued an extension on July 24, 2020 for Section 1031 filing deadlines related to real estate located within certain counties in Michigan and Utah.</p>

<p>In Michigan, the IRS issued extensions for Arenac, Gladwin, Iosco, Midland, and Saginaw Counties for <a href="https://www.irs.gov/newsroom/irs-announces-tax-relief-for-michigan-seve…; target="_blank">victims of the severe storms and flooding</a> that began on May 16, 2020.</p>

<p>In Utah, the IRS issued <a href="https://www.irs.gov/newsroom/irs-announces-tax-relief-for-utah-earthqua…; target="_blank">extensions for victims of the earthquake and aftershocks</a> that began on March 18, 2020 in Davis and Salt Lake Counties.</p>

<p>Accruit suggests that affected taxpayers consult with their tax and legal professionals as well as confirm on IRS website for any updates.</p>

<p>As many have reported, Presidential candidate Joe Biden announced on Tuesday, July 21^st that he plans to raise cash for childcare and elderly services by revamping the rules for 1031 exchanges of real property to limit the tax deferral opportunity to taxpayers with annual incomes of less than $400,000 per year. Targeting 1031 exchanges such as what Biden proposes is not new. Various administrations of both parties have attempted for years to limit the extent of 1031 exchanges or repeal the provision to raise revenue for other programs. Ultimately those attempts have failed when, upon further consideration, they realized that they would have essentially jettisoned a tax provision that is not a “loophole” but was made a part of the Internal Revenue Code in 1921 because it embodied good tax policy and directly influenced economic growth. There were sound reasons this concept was put into the Tax Code nearly 100 years ago. Those policy considerations are true now more than ever.</p>

<h2>Why 1031 exchanges are important</h2>

<p>The reasons for Section 1031 exchanges have become even more important in the tough economic times created by the current pandemic. Repeal or limitation of 1031 exchanges would only run counter to our shared goal of pulling the Country out of current economic doldrums. The <a href="https://www.1031taxreform.com/ling-petrova/">empirical data amassed</a> by diverse groups in the real estate industry is overwhelming that real estate transactions and specifically the ability to defer capital gains by reinvesting in business use or investment property is one of the <a href="http://strongest economic drivers">strongest economic drivers</a> in our country.&nbsp;The temptation to use the dramatic limitation of Section 1031 is shortsighted when viewed in the context of the effect on many other persons, industries and taxing entities that benefit from the frequent transfer of real estate ownership.</p>

<h2>1031 exchange impacts Main Street America</h2>

<p>In addition, contrary to the often used refrain that rich persons or big real estate developers are the main beneficiaries of 1031 exchanges, the fact is that the bulk of real estate exchanges done in this country are in the $500,000 range and many times less than that. In those situations where the exchange value is higher, in situations involving family held Main Street businesses, farms, ranches and other properties, the value being exchanged represents sometimes multi-generational blood, sweat and tears expended in saving up a nest egg that can be used to improve the taxpayers’ properties and quality of life.</p>

<h2>1031 exchanges strongly influence economic growth</h2>

<p>Biden stated that he wants to limit 1031 exchanges so he can use the revenue gained to improve child care and care for the elderly. However, to that point, owners of elder care facilities and child care facilities have regularly used 1031 exchanges to shed themselves of an outmoded facility and upgrade into facilities that better serve the children and elderly folks in their charge. As prior administrations ultimately concluded, when considering the overall impact, it does not make good business sense to overly limit an investment tool that benefits all Americans, spanning all economic strata and demographics, and is one of the most powerful economic drivers this country has.</p>

<p>We published a <a href="https://www.accruit.com/blog/deadline-extension-1031-exchanges-due-covi… post on the IRS Extension Notice 2020-23 in April</a>. Accruit and many others involved in the real estate industry were concerned about the <a href="https://www.accruit.com/blog/clarification-requested-irs-notice-2020-23… for clarification of portions of the Notice</a> and we are still awaiting that clarification. Some benefited from the extension but others were forced to wait for distribution of exchange funds due to the wording of the Notice.</p>

<p>Many of our clients who were in the middle of their 1031 exchanges in early April probably hoped that issues created by the COVID-19 pandemic would be behind us by now. However, it is clear the reasons for the deadline extensions still abound.</p>

<p>Property owners and investors continue to deal with travel restrictions, property inspection delays, problems in viewing replacement properties, appraisal and financing delays, finding enough suitable replacement property inventory, etc. All of these issues are reasons the IRS and Treasury may consider additional extensions which may impact 1031 exchanges. We will continue to update our clients&nbsp;as we draw closer to July 15^th&nbsp;and thereafter should any future extensions be issued.</p>

<p>In the meantime, we hope you&nbsp;enjoy the upcoming Independence Day Holiday!</p>
<!--HubSpot Call-to-Action Code -->

<p style="text-align:center"><a href="https://cta-redirect.hubspot.com/cta/redirect/6205670/959852e4-dc2a-419… alt="Questions about an exchange? Contact us." class="hs-cta-img" id="hs-cta-img-959852e4-dc2a-4190-b67f-4cc1ed13478a" src="https://no-cache.hubspot.com/cta/default/6205670/959852e4-dc2a-4190-b67…; style="border-width:0px;" /></a></p>

<p>On June 11, 2020 the U. S. Treasury released <a href="https://s3.amazonaws.com/public-inspection.federalregister.gov/2020-115…; target="_blank">proposed regulations</a> that have been promised since the passage of the Tax Cuts and Jobs Act (TCJA) at the end of 2017. In the TCJA, Congress repealed 1031 like-kind exchanges of personal property and left taxpayers with only real property 1031 exchanges. There are four primary provisions that clarify or change the current application of Section 1031.</p>

<h2>How do the proposed regulations affect 1031 exchanges?&nbsp;</h2>

<p>First, the proposal makes it clear that real property for purposes of Section 1031 is land and improvements to land, unsevered crops and other natural products of the land, and water and air space adjacent to the land. Treasury also makes it clear they are not willing to adopt any other definition of real property from other areas of tax law. However, it appears that the proposal would treat licenses, permits, and other rights that derive their value from real property as assets eligible for section 1031 which removes uncertainty about those items.</p>

<p>The proposals also confirm a more recent policy contained in IRS rulings that that state law definitions of real property generally are not controlling in determining the meaning of "real property" for purposes of section 1031. Federal law will continue to provide the guideposts.</p>

<p>The proposed regulations also pose distinctions in whether a real property asset is land, an inherently permanent structure, or a structural component of an inherently permanent structure. Under the proposed regulations, a structural component of an inherently permanent structure is any distinct asset that is a constituent part of, and integrated into, an inherently permanent structure.</p>

<p>The proposal changes slightly some current treatment of personal property that is incidental to replacement property. Under the current regulations, incidental personal property that does not exceed 15% of the value of the exchange real property does not have to be delineated in the 45-day identification. It did not allow the personal property to be treated as part of the real property exchange. Under the current proposal the qualified intermediary company facilitating the exchange can distribute exchange funds for acquisition of personal property without violating the exchange rules. In order to do so, the personal property must be incidental to the real property in the exchange which means that if, in standard commercial transactions, the personal property is typically transferred together with real property, and the aggregate fair market value of the incidental property is not greater than 15% of the aggregate fair market value of the replacement property.</p>

<h2>What can be expected while the&nbsp;proposed regulations are considered?</h2>

<p>We can expect many in the real estate industry including 1031 exchange companies, realtors, attorneys, CPA’s and other tax advisors to comment on the proposed regulations. Accruit, LLC and many others actively involved in the real estate industry are encouraged that the proposals are generally taxpayer friendly. The Real Estate Roundtable, National Association&nbsp;of&nbsp;Realtors, the Federation of Exchange Accommodators of which Accruit is a member and others have long maintained that the positive use of 1031 exchange transactions are critical to the health of real estate and the economy in general. That belief is supported by academic research and thoughtful analysis of real-world transactions which confirm that 1031 exchanges encourage continued investment in communities, increase market liquidity, increases local tax revenues and create more jobs.</p>

<p>We will continue to analyze the proposed regulations and comment as needed with many of our like-minded friends in the real estate industry and we will keep our clients posted on the approval process and issuance of the final regulations.</p>

<p><span style="font-family:Arial,Helvetica,sans-serif;">A <a href="https://www.accruit.com/sites/default/files/LKE%20Coalition%20letter%20…; target="_blank">second&nbsp;joint letter</a> from the like-kind exchange coalition, dated Apr. 20 requests clarification about <a href="https://www.irs.gov/pub/irs-drop/n-20-23.pdf">IRS Notice 2020-23</a> and whether Affected Taxpayers may use postponement provisions of Section 17 in Rev. Proc. 2018-58. &nbsp;&nbsp;</span></p>

<p><span style="font-family:Arial,Helvetica,sans-serif;">Section 17.02 provides in pertinent parts as follows:</span></p>

<p><span style="font-family:Arial,Helvetica,sans-serif;"><em>(1) The last day of a 45-day identification period and the last day of a 180-day exchange period that fall on or after the date of a federally declared disaster are postponed by 120 days or to the last day of the general disaster extension period authorized by an IRS News Release or other guidance announcing tax relief for victims of the specific federally declared disaster, whichever is later. However, in no event may a postponement period extend beyond: (a) the due date (including extensions) of the taxpayer’s tax return for the year of the transfer (See §1.1031(k)-1(b)(2)(ii); or (b) one year (See section 7508A(a)).</em></span></p>

<p><span style="font-family:Arial,Helvetica,sans-serif;">The letter also requests that March 13, 2020 be deemed to be the beginning date of disaster relief for 1031 exchanges and that each day of the disaster period from March 13 to July 15 be treated as the date of the federally declared disaster.</span></p>

<p><span style="font-family:Arial,Helvetica,sans-serif;">Further, the FEA asked that if the end of the 45-day identification period or the end of the 180-day exchange period falls within the disaster period, that the deadlines to complete both of those actions be extended by 120 days or to July 15, 2020, whichever is later.</span></p>

<p><span style="font-family:Arial,Helvetica,sans-serif;">Lastly, we will need to wait and see whether we receive any opinion on if the extension provisions are mandatory or permissive.&nbsp; The language in IRS 2020-23 automatically extends the 45 &amp; 180 day periods until July 15.&nbsp; We hope to obtain some clarity from the IRS about whether the taxpayer can elect to take the extension or conclude the exchange on such earlier date that the exchanger would have otherwise been able to.&nbsp; &nbsp;&nbsp;&nbsp;</span></p>

<p><span style="font-family:Arial,Helvetica,sans-serif;">We will continue to keep up-to-date&nbsp;on all new information or documentation received in response to the joint letter dated April 20.&nbsp; If you have questions about your exchange transactions, please contact your exhange manager or call us at 800-237-1031.</span></p>