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A 1031 Exchange (Tax-Deferred Exchange) Is One Of The Most Powerful Tax Deferral Strategies Remaining Available For Taxpayers. Anyone involved with advising or counseling real estate investors should know about tax-deferred exchanges, including Realtors, lawyers, accountants, financial planners, tax advisors, escrow and closing agents, and lenders. Taxpayers should never have to pay income taxes on the sale of property if they intend to reinvest the proceeds in similar or like-kind property.
The Advantage of a 1031 Exchange is the ability of a taxpayer to sell income, investment or business property and replace with like-kind replacement property without having to pay federal income taxes on the transaction. A sale of property and subsequent purchase of a replacement property doesn't work, there must be an Exchange. Section 1031 of the Internal Revenue Code is the basis for tax-deferred exchanges. The IRS issued "safe-harbor" Regulations in 1991 which established approved procedures for exchanges under Code Section 1031. Prior to the issuance of these Regulations, exchanges were subject to challenge under examination on a variety of issues. With the issuance of the 1991 Regulations, tax-deferred exchanges became easier, affordable and safer than ever before.
The Disadvantages of a Section 1031 Exchange include a reduced basis for depreciation in the replacement property. The tax basis of replacement property is essentially the purchase price of the replacement property minus the gain which was deferred on the sale of the relinquished property as a result of the exchange. The replacement property thus includes a deferred gain that will be taxed in the future if the taxpayer cashes out of his investment.
Exchange Techniques. There is more than one way to structure a tax-deferred exchange" under Section 1031 of the Internal Revenue Code. However, the 1991 "safe-harbor" Regulations established procedures which include the use of an Intermediary, direct deeding, the use of qualified escrow accounts for temporary holding of "exchange funds" and other procedures which now have the official blessing of the IRS. Therefore, it is desirable to structure exchanges so that they can be in harmony with the 1991 Regulations. As a result, exchanges commonly employ the services of an Intermediary with direct deeding.
Exchanges can also occur without the services of an Intermediary when parties to an exchange are willing to exchange deeds or if they are willing to enter into an Exchange Agreement with each other. However, two-party exchanges are rare since in the typical Section 1031 transaction, the seller of the replacement property is not the buyer of the taxpayer's relinquished property.
With Permission © 2004 - Copyright 1031CPAS, 717 Fifth Avenue, Longmont, CO 80501
1031 Corporation is an Exchange Company Specializing in Tax-Deferred Exchanges
(888) 367-1031 Toll Free | (303) 402-1031 Local | (303) 443-0107 Fax | |
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What is your FICO Score?
Along with the credit report, lenders can also buy a credit score based on the information in the report. That score is calculated by a mathematical equation that evaluates many types of information that are on your credit report at that agency. By comparing this information to the patterns in hundreds of thousands of past credit reports, the score identifies your level of future credit risk.
In order for a FICO® score to be calculated on your credit report, the report must contain at least one account which has been open for six months or greater. In addition, the report must contain at least one account that has been updated in the past six months. This ensures that there is enough information - and enough recent information – in your report on which to base a score.
About FICO® scores
Credit bureau scores are often called “FICO scores” because most credit bureau scores used in the US are produced from software developed by Fair Isaac and Company. FICO scores are provided to lenders by the three major credit reporting agencies: Equifax, Experian and TransUnion.
FICO scores provide the best guide to future risk based solely on credit report data. The higher the score, the lower the risk. But no score says whether a specific individual will be a “good” or “bad” customer. And while many lenders use FICO scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable for a given credit product. There is no single “cutoff score” used by all lenders and there are many additional factors that lenders use to determine your actual interest rates. However you can now see what interest rates lenders typically offer consumers based on FICO score ranges.
Other Names for FICO Scores
FICO scores have different names at each of the three credit reporting agencies. All of these scores, however, are developed using the same methods by Fair Isaac, and have been rigorously tested to ensure they provide the most accurate picture of credit risk possible using credit report data.
| Credit Reporting Agency |
FICO® Score |
| Equifax |
BEACON® |
| Experian |
Experian/Fair Isaac Risk Model |
| TransUnion |
EMPIRICA® |
More than one score
In general, when people talk about "your score", they're talking about your current FICO score. However, there is no one score used to make decisions about you. This is true because:
- Credit bureau scores are not the only scores used.
Many lenders use their own scores, which often will include the FICO score as well as other information about you.
- FICO scores are not the only credit bureau scores.
There are other credit bureau scores, although FICO scores are by far the most commonly used. Other credit bureau scores may evaluate your credit report differently than FICO scores, and in some cases a higher score may mean more risk, not less risk as with FICO scores.
- Your score may be different at each of the three main credit reporting agencies.
The FICO score from each credit reporting agency considers only the data in your credit report at that agency. If your current scores from the three credit reporting agencies are different, it's probably because the information those agencies have on you differs.
- Your FICO score changes over time.
As your data changes at the credit reporting agency, so will any new score based on your credit report. So your FICO score from a month ago is probably not the same score a lender would get from the credit reporting agency today.
MORE?
WWW.myFICO.COM
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Calculators
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HOME BUYERS .....Let me help you find out what you can afford!
My mortgage calculator will help you determine loan amounts, mortgage qualification, or whether you should be renting or buying.
Complete the fields below (e.g., Cost of Home, Down Payment, Monthly Income) and click Calculate Now. To view the different results of your calculation, click on the various tabs. To mail yourself a copy of your results, click the Receive this Detailed Analysis link.
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Are you looking for information about FHA LOANS? Visit: www.FHA.gov. You'll find details about the programs, how to qualify, special requirements and how to apply. Also learn about the NEW Hope fo HOmeowners (H4H) Program for current homeowners. HUD LAUNCHES COMPREHENSIVE WEBSITE TO INCREASE FINANCIAL LITERACY, PROMOTE HEALTHY HOMEOWNERSHIP
My Money, My Home, My FutureWASHINGTON - The U.S. Department of Housing and Urban Development today launched a new, comprehensive website to assist Americans with improving financial literacy, sustaining healthy homeownership and achieving financial security. The My Money, My Home, My Future website provides a range of interactive resources to inform users about the importance of financial literacy, including a Self-Assessment Tool, online games and informative classes. "It is imperative that Americans are better educated about their finances and understand what it takes to be a responsible homeowner," said HUD Secretary Steve Preston. "The resources on the website allow families to plan ahead to make smart choices about their finances and homebuying decisions." The new site provides a wide-range of information about all avenues needed to be successful on the road to greater financial education, including: - Building a Financial Foundation;
- Sustaining Healthy Homeownership; and
- Achieving Financial Security.
One of the most unique features of this website is the Self-Assessment Tool. The Self-Assessment Tool provides an extensive guide to help users learn more about personalized options for purchasing and/or refinancing their home. Users will be prompted to answer a few questions. Based on the answers given, the Self-Assessment Tool lists numerous links to visit on-line to learn more about the necessary and correct steps to own a home, refinance a home, enhance their financial skills, and much more. Some of the other links on My Money, My Home, My Future give detailed information about: - 9 Steps to Buying a Home
- Housing Counselors and Lenders
- Banking, Credit and Building Wealth
- Foreclosure Process and Alternatives
- Refinancing Loans and FHA Insured Loans
This new site is also located on www.HUD.gov and www.FHA.gov both in easy to find locations on the main web pages. |
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