September 20, 2017

A Case of Nonacquiescence: I.R.S. Opposes Bartell Decision

September 20, 2017/ Ruchelman P.L.L.C.

Tax-smart investors in U.S. real estate understand that the principal method of disposing real property is to participate in a two-party swap transaction with the ultimate purchaser or a three-party deferred swap through a qualified intermediary. In Bartell v. Commr., the U.S. Tax Court allowed a replacement property to be purchased by an exchange accommodation title holder with whom it was parked for 17 months prior to its transfer. However, the I.R.S. has issued a notice of nonacquiescence, advising taxpayers that it disagrees with the holding of the court. Rusudan Shervashidze and Nina Krauthamer explain the facts in Bartell, the safe harbor that was published in Rev. Proc 2000-37, and the status of the facilitator as a beneficial owner for purposes of allowing tax deferral in the swap transaction.

March 27, 2017

New Developments in the World of Reverse Like-Kind Exchanges

March 27, 2017/ Ruchelman P.L.L.C.

Tax planners to New York City real estate families understand that real estate should never be sold. Rather, it should be exchanged in a tax-free, like-kind exchange. The exchange can be bifurcated into two independent transactions – one a purchase and the other a sale – without affecting tax-free treatment, provided certain well identified rules are followed. Moreover, the replacement can be acquired before the sale of an existing parcel is effected. In a recent advisory opinion affecting property in New York State, the Department of Taxation and Finance issued a taxpayer-friendly advisory opinion involving real estate transfer tax exposure in a reverse like-kind exchange. Rusudan Shervashidze and Nina Krauthamer explain the ruling.

October 26, 2016

Estate of Bartell Offers Taxpayer Relief in a Reverse Deferred §1031 Exchange

October 26, 2016/ Ruchelman P.L.L.C.

Many countries provide a tax deferral benefit for property gains through the form of a reinvestment reserve. Although U.S. tax law does not provide reserves, it does permit a taxpayer to participated in a three-party exchange of properties that may offer deferral benefits that are comparable to a reserve. Most three-party exchanges involve a sale as the first step and a reinvestment of proceeds as the second step, but in some instances, the reinvestment may occur before the sale. The I.R.S. position on these reverse exchanges is that several enumerated hurdles must be overcome before tax deferral is allowed. However, as one recent U.S. Tax Court case demonstrates, the I.R.S. view is not the last word. Rusudan Shervashidze and Nina Krauthamer explain the holding in the case, place it in context, and suggest that it may offer hope for reverse three-party exchanges that do not meet I.R.S. guidelines.