175 South Segiun

New Braunfels, Texas 78130

800-839-1031      830-625-1031 Fax

NEWSLETTER

The Post Office is real estate to that performs like a Treasury note.
 

• The properties are readily marketable. The performance of these properties is very predictable because the U.S. government pays the rent and manages the property under a long-term lease. Since many investors appreciate the lack of risk in these properties, they historically have been much sought after and sense consequentially been quick to sell. 
• The properties require very little management by the owner since the U.S. government controls the property and pays the rent. No longer does the landlord worry about vacancies or the financial health of the tenants or the strength of the local or national economy.
   

Use as back up property for the 45-day identification letter.
 

Frequently in an exchange you know the replacement property you wish to purchase within the 180 day period. It has been our experience that in most instances it is possible to successfully contract for and close on the desired property to complete the exchange. On occasion however, some people find that they either cannot come to terms with the seller or serious title or environmental problems become apparent. As protection against these possible events, it is prudent to have an alternative property identified to complete your exchange. Also since the net leased government building is so highly marketable it may be possible to exchange it at a later date for other property that more closely fits your business needs or investment strategy.

Use as an alternative to a construction exchange.
 

On occasion, the exchanging party wishes to have newly constructed replacement property. An intermediary in a forward exchange may accommodate these desires, if timing is not a problem. In order to become tax-free the intermediary must acquire the land, and the value of the new property must be sufficient when deeded to the exchangor on or before the 180^th day. In order to be of sufficient value, the cost of the land and construction-in progress must exceed the sales proceeds of the relinquished property. For example let us assume the relinquished property sells for $1,000,000 and construction-in-progress on the new $ 2,000,000 building is only 30% complete on the 180^th day giving us a construction value of $600,000. If the newly acquired land costs $100,000 then the replacement property has a total value of $700,000. In these circumstances, the taxable gain in the exchange is $300,000 ($1,000,000 less $700,000).
 

It is also possible to undertake a reverse construction exchange by having the intermediary construct the replacement property first and selling the relinquished property after completing the construction. 

An alternative, which removes the timing risk in a forward construction exchange and the tax risk in a reverse construction exchange, is the exchange into a net-leased property to the government followed by a refinance of up to 80% to 90% of it's value in order to provide for the new construction.
 

Use the post office as a means to acquire "other assets".
 

On occasion one wishes to acquire assets with the proceeds of sale for the relinquished property that do not qualify under IRC 1031 to include stocks, bonds, foreign real estate, and partnership interests for example. As we previously saw with new construction, we could exchange into a post office, refinance it and subsequently purchase those other assets. Ultimately you save the (1) tax on the sale,(2) you have a free and clear post office when the mortgage is paid and (3)you have the other assets that you purchased with the refinancing. This technique is also beneficial when those other assets are speculative in nature because you know that worst case when your post office mortgage is paid in full you still have preserved the value of the property originally sold.

Additionally, if the proceeds of the refinancing were placed into an asset protection trust or generation skipping trust, long-term family security could be achieved.