Posts Tagged ‘capital gains’
The Magic of CRE SPE’s
August 19th, 2009 | 
Author: 
Many times, when an individual, or a large developer/operator purchases a commercial property, they buy it through a limited partnership or limited liability company. There are many reasons as to why they do this. Anonymity is one. Most wealthy people are private, and do not want to be bothered, whether it is by brokers or any other third party looking to drum up new business. Probably the chief reason, however, has to do with tax law, as property level gains are not attributed the same way to the individuals who are members of the LP or LLC as if they owned the property outright as individuals. Essentially it provides a corporate veil of ownership, both in terms of who actually owns the property, as well as how Uncle Sam views its capital gains/losses. Furthermore, if there is ever an accident, or other mitigating factor whereby a lawsuit is brought upon the owner of a property, it again can help protect the personal assets of the actual owners if they are found guilty of a civil lawsuit, limiting the plaintiff solely to property level monies. But wait, there’s one other big reason single purpose entities (SPE’s) exist… and it isn’t to protect the owner. Read the rest of this entry »
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Posted in Banking & Finance, Owners & Developers | 
Tags: balloon payment, bankruptcy, borrower, capital gains, commercial real estate, corporate veil, lawsuit, lender, LLC, LP, personal assets, property, single purpose entity, SPE | 
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“Safe Harbor” May Not Be Safe After All
Back on November 26, 2008, LandAmerica Financial Group, the third largest 1031 exchange intermediary at the time, filed for bankruptcy protection. Its subsidiary, LandAmerica 1031 Exchange Services (LES) filed for voluntary relief under Chapter 11 of the bankruptcy code. At the time, LES was the intermediary for over 450 incomplete transactions.
With a recent ruling by a U.S. Bankruptcy Court in the case of Millard Refrigerated Services vs. LandAmerica 1031 Exchange Services, any seller might now risk having some or all of their money completely out of their control if it was set aside with an intermediary for a tax-deferred exchange. 1031 intermediaries were once known as “safe harbors”, essentially as a safe place to dock one’s proceeds from a sale until they could find another property with which to use the funds to buy, thus completing their 1031 exchange, and protecting their capital gains from being taxed by the federal government. Well apparently, these safe harbors ain’t so safe anymore. Read the rest of this entry »
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