<p>If you read enough of the Accruit Website, you'll notice that we talk a good bit about how technology plays an important role in the processing of successful 1031 Like-Kind Exchanges (LKEs).&nbsp; We obviously think this is an important reason to do business with us, but it's possible that some readers may want to know more about <em>why</em> a technology-driven process is so beneficial to them.</p>

<p>There are a number of ways in which a software-based process helps you, and addressing them all at once might be too much for one sitting. So let's call this part one of a series.</p>

<p>Up first, technology assures your compliance with key milestones. Without the use of advanced technology you're relying on manual processes to ensure that your exchange falls within the Section 1031 regulations.&nbsp; Many key milestones take place during the course of an exchange, and if they're not met you won't be able to complete the exchange.&nbsp; For example, if you do not purchase replacement property by day 45, you must provide your qualified intermediary (QI) with identified property you plan to purchase by day 180.&nbsp; A QI cannot accept identifications after day 45, so if you aren't properly reminded to follow this step, you will not be able to complete the exchange.</p>

<p>In addition to managing the exchange process, having an online resource available 24x7 to look up information about your exchange is very comforting...you don't need to wait for normal business hours to have your questions answered.&nbsp; With the Accruit LKE solution you are able to look up your account balances and other key information online, anytime, anywhere.</p>

<p>Accruit has the only patented process for performing Like-Kind Exchanges over the Internet.&nbsp; This not only ensures that you're kept informed of key steps in an exchange using technology, you have information available to you 24x7.</p>

<p>I&nbsp;believe this is a fundamentally better way of completing 1031 exchanges. Check back periodically for more reasons why a tech-enabled solution is your best option.</p>

<p>If you missed last week's <em>Wall Street Journal</em> feature entitled <a href="http://online.wsj.com/article/SB123739309941072501.html&quot; target="_blank">"Greener and Cheaper,"</a> have a look - it could change your business. Authored by Dr. Alan Robinson (Isenberg School of Management, University of Massachusetts) and Dr. Dean Schroeder (College of Business Administration, Valparaiso University), the article examines Subaru of Indiana Automotive Inc., which has established a blueprint for making sustainability work as business practice. They outline a six-step roadmap and conclude that despite what many companies think -- that reducing their environmental impact is a nice idea, but impractical because of the cost -- businesses <em>can</em> go green and <em>lower</em> costs at the same time.</p>

<p>We've talked elsewhere about how businesses in all industries can leverage 1031 Like-Kind Exchanges (LKEs) to help them green their operations. The situation goes something like this:</p>

<ul>
<li>Up until the last couple of years "green" and "sustainability" were words primarily associated with the environmental movement. Now, though, I think most companies have come to understand that greening is a business imperative. It makes financial sense and it's an inevitability - a "when," not an "if."</li>
<li>Greener technologies - whether we're talking about fleet, HVAC, supply chain processes, etc. - are money savers. You use 40% less energy, you save 40% on your energy bill.</li>
<li>However, you have to invest in the new infrastructure, and that costs money. For a lot of businesses today it can be hard to think about cost savings down the line when you're cash-strapped right now.</li>
</ul>

<p>The Accruit answer:</p>

<ul>
<li>There are local, state and federal tax incentives than your business can take advantage of now (how much benefit you can derive depends on where you're located);</li>
<li>the Obama administration makes clear that there's more infrastructure funding on the way; and</li>
<li>you can then supplement these funds by using LKEs to defer the taxes you'd have otherwise had to pay when selling the old equipment.</li>
<li>Between operational savings, 1031 deferrals and tax incentives, all of a sudden making the transition sooner rather than later begins to make sense.</li>
</ul>

<p>Still, I understand that this isn't the kind of one-shot panacea that a lot of businesses might prefer. The solution is incremental and draws from multiple sources, which means that Total Cost of Ownership (TCO) and Return on Investment (ROI) propositions can be trickier to articulate.</p>

<p><strong>Robinson and Schroeder's Subaru Indiana analysis, though, makes the case for acting sooner rather than later even stronger.</strong> It outlines a proven process, provides concrete advice and illustrates the company's success with solid financial data, all of which suggests a clear course of action: begin greening your business <em>now</em>.</p>

<p>Depending on your business, 1031 Exchanges may play a huge role in your drive to sustainability. Or it may play a small role (or none at all). Either way, the <em>WSJ</em> analysis shows how the math tips more in your favor than you may have realized once you factor in <em>all</em> the variables.</p>

<ul>
<li><em>Rep. Joel Judd applauded for defending the interests of consumers and businesses performing Section 1031 exchanges</em></li>
<li><em>..."no client should have reason to fear doing a Like Kind-Exchange."</em></li>
</ul>

<p><strong>March 26, 2009</strong></p>

<p>(Denver) Colorado House Bill 09-1254, sponsored by State Representative Joel Judd and State Senator Ted Harvey, has been unanimously passed by the 67^th General Assembly of the State of Colorado. This legislation is designed to create consumer protections relating to <a href="http://en.wikipedia.org/wiki/Internal_Revenue_Code_section_1031&quot; target="_blank">Section 1031 Like-Kind Exchanges</a> facilitated by Qualified Intermediaries (QI) and Exchange Accommodation Titleholders, otherwise known as Exchange Facilitators.</p>
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<p>For the past two years a group of QIs committed to responsible business practice has served as a resource team for legislators promoting this bill. The team, comprised of members of the Federation of Exchange Accommodators (FEA), included committee leader Brent Abrahm of Accruit, Mary Lou Schwab of Bankers Escrow; Paul Holloway of Land Title Exchange Corporation; David Wright of 1031 Corporation Exchange Professionals; Scott Saunders of Asset Preservation; Suzanne Goldstein Baker of Investment Property Exchange Services, Inc. (IPX1031); and Max Hansen of American Equity Exchange, Inc.&nbsp; Abrahm, Baker, and Hansen also serve on the FEA's Board of Directors.</p>

<p>Abrahm, CEO of Denver-based Accruit, LLC, explains that "the like-kind exchange (LKE) was added to the Internal Revenue Code in 1921 to promote business reinvestment in our economy. It is important, especially during difficult economic times like the present, that this ultimate stimulus tool be governed in the best interests of the consumers and businesses that utilize it. We applaud Representative Judd and Senator Harvey for supporting legislation that protects the integrity of the services provided by QIs doing business in Colorado. It's been an honor to be a resource for this landmark legislation, which will ensure appropriate business standards for all QIs in the state."</p>

<p>Jason Hopfer of JLH Public Affairs said, "It's a pleasure to assist these industry leaders, through the FEA, in their quest to protect and preserve this tax planning tool and the businesses in Colorado that it serves."</p>

<p>The FEA, which represents Qualified Intermediaries nationwide, requires that its members follow a strict code of ethics consistent with the legislation presented by Representative Judd. Billions of dollars in like-kind exchanges for real estate and other business assets are transacted each year, and House Bill 09-1254 will ensure that all Colorado Exchange Facilitators follow secure banking procedures that provide sufficient liquidity of funds to meet their obligations to their clients.</p>

<p>"The FEA Code of Ethics very specifically provides every member organization a set of standards and business processes to safely handle assets and business funds," says Hugh Pollard, President of the FEA. "With proper due diligence, <a name="OLE_LINK2"></a><a name="OLE_LINK1">no client should have reason to fear doing an LKE</a>. Each client should ask detailed and specific questions about how their money will be invested and they should make sure that their QI&nbsp;provides proper financial assurances."</p>

<h3>About the Federation of Exchange Accommodators</h3>

<p>The Federation of Exchange Accommodators (FEA) is the only national trade organization formed to represent qualified intermediaries (QIs), their primary legal/tax advisors and affiliates who are directly involved in Section 1031 Exchanges. Formed in 1989, the FEA was organized to promote the discussion of ideas and innovations in the industry, to establish and promote ethical standards of conduct for QIs, to offer education to both the exchange industry and the general public, and to work toward the development of uniformity of practice and terminology within the exchange profession. The FEA also provides timely input and updates on pending State and Federal legislation, Internal Revenue Service and Treasury Rulings, and Court Decisions. Parties with questions about Section 1031 and its operating principles are encouraged to contact the FEA at 215.564.3484 or visit the Web site at <a href="http://www.1031.org/&quot; target="_blank">www.1031.org</a>.</p&gt;

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<p><strong>These TIC purchases often require commercial bank lending. </strong>For a 100% tax deferred exchange, the exchanger needs to make sure that all of the net proceeds from the sale of their old property are utilized for the TIC purchase. Additionally, any mortgage debt paid off from the sale of their old property must be replaced. Many of the commercial lenders for these TIC purchases require the bank lending be made to a Delaware LLC entity. This creates the requirement for the 1031 exchanger to have a single member LLC for each party of the exchange.</p>

<p>&nbsp;</p>
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<h1 style="background: white;"><span style="font-size:11.0pt"><span style="font-family:&quot;Calibri&quot;,sans-serif"><span style="color:#212529"><span style="font-weight:normal">Check out the following lending issues prior to your 1031 exchange transaction:</span></span></span></span></h1>

<h4 style="background:white"><span style="font-size:11.0pt;font-family:&quot;Calibri&quot;,sans-serif;
mso-ascii-theme-font:minor-latin;mso-hansi-theme-font:minor-latin;mso-bidi-theme-font:
minor-latin;color:#212529;font-weight:normal">1. Clean up the old property title by transferring it to your individual name. Mortgage portfolio lenders will not lend to living trusts, revocable trusts, partnerships, or limited liability companies. Remember that the IRS considers a single owner trust, a single member limited liability company or a husband and wife owned partnership as a disregarded entity. This means that you can transfer ownership back and forth with no federal tax effects and still obtain the mortgage lending. Be sure to check that you do not trigger a "due on sale clause" in your mortgage note when transferring such ownership back and forth.<o:p></o:p></span></h4>

<h4 style="background:white"><span style="font-size:11.0pt;font-family:&quot;Calibri&quot;,sans-serif;
mso-ascii-theme-font:minor-latin;mso-hansi-theme-font:minor-latin;mso-bidi-theme-font:
minor-latin;color:#212529;font-weight:normal">2. Mortgage lenders understand the purpose of a 1031 exchange – investment property purchase. Do not try to obtain 2nd home mortgage financing for a 1031 replacement property. The underwriters will not fund a loan if you misrepresent the use of the property.<o:p></o:p></span></h4>

<h4 style="background:white"><span style="font-size:11.0pt;font-family:&quot;Calibri&quot;,sans-serif;
mso-ascii-theme-font:minor-latin;mso-hansi-theme-font:minor-latin;mso-bidi-theme-font:
minor-latin;color:#212529;font-weight:normal">3. If proceeds from a mortgage loan cause an exchanger to receive cash at closing of the replacement property, the exchanger will incur a tax liability. Instead request to have your earnest money refunded or apply the excess as a principal reduction payment on the settlement statement to avoid capital gains tax.<o:p></o:p></span></h4>

<h4 style="background:white"><span style="font-size:11.0pt;font-family:&quot;Calibri&quot;,sans-serif;
mso-ascii-theme-font:minor-latin;mso-hansi-theme-font:minor-latin;mso-bidi-theme-font:
minor-latin;color:#212529;font-weight:normal">4. When participating in a reverse exchange do not utilize a residential mortgage lender who sells their loans to other investors. Only commercial banks will lend to a Limited Liability Company (LLC) which acts as the parking entity for a <a href="https://www.accruit.com/blog/infographic-10-steps-reverse-exchange&quot; title="reverse 1031 exchange">reverse exchange</a>. The commercial bank will want the exchanger to guarantee the loan or will tie up additional collateral the Exchanger may have. Some commercial banks are resistant to lending to the LLC entity which parks the replacement property for the exchanger. Other commercial banks look to the credit strength of the exchanger and will fund 90 to 100% of the purchase price. Generally, the lending is bridge type financing and can be interest only. Often reverse lending loans take more time to fund as there are additional requirements such as environmental reports, surveys, commercial appraisals, liability insurance and the loan committee approval process. Understanding the commercial bank requirements for a reverse parking loan will allow an exchanger to coordinate closing dates, allowing time for loan processing.<o:p></o:p></span></h4>

<h4 style="margin:0in;background:white"><span style="font-size:11.0pt;
font-family:&quot;Calibri&quot;,sans-serif;mso-ascii-theme-font:minor-latin;mso-hansi-theme-font:
minor-latin;mso-bidi-theme-font:minor-latin;color:#212529;font-weight:normal">5. Many exchangers purchase replacement property in the form of Tenant- In-Common (TIC) percentage interests in large commercial or apartment complexes.<o:p></o:p></span></h4>

<h4 style="background:white"><span style="font-size:11.0pt;font-family:&quot;Calibri&quot;,sans-serif;
mso-ascii-theme-font:minor-latin;mso-hansi-theme-font:minor-latin;mso-bidi-theme-font:
minor-latin;color:#212529;font-weight:normal">6. Realize that mortgage lenders often cannot fund a loan on the day of closing. Occasionally, exchangers will coordinate simultaneous exchange closings at the same title company to save on exchange fees. Both the old property sale and the new property purchase must occur on the same day. If the buyer's mortgage lender does not fund their loan when the old property is sold, the sale is closed in escrow. The exchanger should not continue with the closing paperwork for the purchase of the new property without a qualified intermediary involved. The 1031 exchange will not be allowed by the IRS if the old property closes in escrow without the use of a <a href="https://www.accruit.com/qi-services&quot; title="qualified intermediary">qualified intermediary</a>.<o:p></o:p></span></h4>

<h4 style="background:white"><span style="font-size:11.0pt;font-family:&quot;Calibri&quot;,sans-serif;
mso-ascii-theme-font:minor-latin;mso-hansi-theme-font:minor-latin;mso-bidi-theme-font:
minor-latin;color:#212529;font-weight:normal">7. Be careful when you refinance to take money out of your old investment property. An exchanger should not obtain cash out refinance on their old property immediately before their 1031 exchange transaction. The IRS will not allow the <a href="https://www.accruit.com/property-owners/1031-exchange-explained&quot; title="1031 exchange">1031 exchange</a> if an exchanger cannot prove they used the cash proceeds to improve the old property. Remember that an exchanger can immediately refinance their new replacement property after the 1031 exchange transaction is complete and take cash out without any tax ramifications.<o:p></o:p></span></h4>

<h4 style="background:white"><span style="font-size:11.0pt;font-family:&quot;Calibri&quot;,sans-serif;
mso-ascii-theme-font:minor-latin;mso-hansi-theme-font:minor-latin;mso-bidi-theme-font:
minor-latin;color:#212529;font-weight:normal">For the savvy real estate investor, a 1031 exchange can defer taxes and generate more cash flow and appreciation potential. Part of the equation for higher cash flow is to structure the best possible mortgage loan. By planning, exchangers will obtain their investment goals with the flexible mortgage products available in the marketplace. Plan your next 1031 exchange with lending issues in mind! Please note that all material provided in this newsletter is for informational purposes only and the author is not providing legal, tax accounting or other professional services. The accuracy of the information provided as it pertains to your situation is not guaranteed.<o:p></o:p></span></h4>

<h4 style="margin:0in;background:white"><span style="font-size:11.0pt;
font-family:&quot;Calibri&quot;,sans-serif;mso-ascii-theme-font:minor-latin;mso-hansi-theme-font:
minor-latin;mso-bidi-theme-font:minor-latin;color:#212529;font-weight:normal">Please seek professional consultation if legal, tax accounting or other expert assistance is required.</span></h4>

<h4 style="margin:0in;background:white"><span style="font-size:11.0pt;
font-family:&quot;Calibri&quot;,sans-serif;mso-ascii-theme-font:minor-latin;mso-hansi-theme-font:
minor-latin;mso-bidi-theme-font:minor-latin;color:#212529;font-weight:normal"><o:p></o:p></span></h4>

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<p style="text-align:center"><a href="https://cta-redirect.hubspot.com/cta/redirect/6205670/914580be-98fb-4bc…; target="_blank"><img alt="Start Your 1031 Exchange with Accruit today" class="hs-cta-img" height="258" id="hs-cta-img-914580be-98fb-4bcd-896e-3085b6212867" src="https://no-cache.hubspot.com/cta/default/6205670/914580be-98fb-4bcd-896…; style="border-width:0px;" width="700" /></a></p>

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<p style="font: 9px/1.2 Verdana, Arial, Helvetica, sans-serif; color: #fff;">Please note that all material provided in this newsletter is for informational purposes only and the author is not providing legal, tax accounting or other professional services. The accuracy of the information provided as it pertains to your situation is not guaranteed. Please seek professional consultation if legal, tax accounting or other expert assistance is required.</p>
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