The Tax-Free Exchange Loophole: How Real Estate Investors Can Profit from the 1031 Exchange [Hardcover]

Jack Cummings (Author)

Book Description

Publication Date: April 5, 2005 | ISBN-10: 0471695785 | ISBN-13: 978-0471695783 | Edition: 1

Discover the Greatest Investment Tool of All Time!

The tax breaks and loopholes built into real estate make it one of the most profitable investments in the world. In fact, the real estate tax exchange loophole--known as the 1031 Exchange--is one of the greatest tax loopholes in existence. This loophole allows a real estate investor to sell a property without paying a penny in capital gains tax--as long as the investor reinvests his or her profits into another property. Not only is this a great way to invest without paying taxes, it's also a great way to grow real wealth over time. The rules can be confusing, but tax exchange works for every investor, big or small. This handy guide offers detailed, step-by-step advice on using the 1031 Exchange--and much more:
* How the capital gains tax works
* Other little-known real estate loopholes
* Creative real estate financing techniques
* Advanced elements of tax-free exchanges
* Terms and concepts you need to know
* Eight things that can hold up a closing
* Transferring debt to other properties
* How zoning laws affect your investments
* How tax-free exchanges affect your tax shelter
* Where to find potential exchanges
* Twelve creative techniques applied to exchanges
* Nine booby traps to watch out for in exchanges


Don't wait--use the 1031 Exchange to start building your fortune today!

Editorial Reviews

From the Inside Flap

If you're a real estate investor, the IRS's 1031 tax-free exchange is one of the best tools available for making money and saving on taxes. Simply put, it allows you to roll over the profit from one real estate investment into a new investment without having to pay capital gains taxes. In this way, you can grow your wealth in today's real estate market without being pummeled by taxes when you sell.

In fact, the tax-free exchange might be the greatest investment tool of all time. Unfortunately, not enough investors know how to use this legal and profitable loophole to their best advantage. There's no doubt that the IRS rules are confusing, but that's no excuse for letting free money pass you by. In this comprehensive, straightforward guide, successful real estate investor Jack Cummings uses his own experiences—and real examples from his own portfolio—to explain every aspect of the tax-free exchange for investors just like you.

You'll learn how to minimize your tax losses on individual properties, as well as how to multiply the effect of the tax-free exchange by continually rolling profits over into new properties. You'll learn a wealth of various techniques for lowering taxes even if you don't use the tax-free exchange, and different creative techniques real estate insiders use to finance new properties. Plus, helpful checklists and step-by-step guidance will help you avoid the pitfalls and keep you from making rookie mistakes.

Real estate investing is hotter than ever, in part, because the tax benefits of real estate make it a great way to build wealth over time and protect that wealth from the taxman. The tax-free exchange, as well as other real estate tax loopholes you'll read about, is designed to increase home ownership and investment in real estate. But they only work if you use them! The Tax-Free Exchange Loophole presents clear, practical, and step-by-step guidance on making the most of IRS rules to increase profits and lower your taxes.

From the Back Cover

Discover the Greatest Investment Tool of All Time!

The tax breaks and loopholes built into real estate make it one of the most profitable investments in the world. In fact, the real estate tax exchange loophole—known as the 1031 Exchange—is one of the greatest tax loopholes in existence. This loophole allows a real estate investor to sell a property without paying a penny in capital gains tax—as long as the investor reinvests his or her profits into another property. Not only is this a great way to invest without paying taxes, it's also a great way to grow real wealth over time. The rules can be confusing, but tax exchange works for every investor, big or small. This handy guide offers detailed, step-by-step advice on using the 1031 Exchange—and much more:

• How the capital gains tax works
• Other little-known real estate loopholes
• Creative real estate financing techniques
• Advanced elements of tax-free exchanges
• Terms and concepts you need to know
• Eight things that can hold up a closing
• Transferring debt to other properties
• How zoning laws affect your investments
• How tax-free exchanges affect your tax shelter
• Where to find potential exchanges
• Twelve creative techniques applied to exchanges
• Nine booby traps to watch out for in exchanges

Don't wait—use the 1031 Exchange to start building your fortune today!

See all Editorial Reviews

Product Details

• Hardcover: 304 pages
• Publisher: Wiley; 1 edition (April 5, 2005)
• Language: English
• ISBN-10: 0471695785
• ISBN-13: 978-0471695783
• Product Dimensions: 9.4 x 6.2 x 1 inches
• Shipping Weight: 15.2 ounces (View shipping rates and policies)
• Average Customer Review: 3.2 out of 5 stars  See all reviews (6 customer reviews)
• Amazon Best Sellers Rank: #1,260,395 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

29 of 29 people found the following review helpful:

3.0 out of 5 stars I truly wish this book was better, September 22, 2005

By 

A reader from DC "A reader from Washington DC" (Washington DC area) - See all my reviews

This review is from: The Tax-Free Exchange Loophole: How Real Estate Investors Can Profit from the 1031 Exchange (Hardcover)

Jack Cummings has the right idea; there are many investors wish to "exchange" their property to defer paying income tax today. But this book fails to focus on HOW TO DO IT. What is really needed here are very specific items, such as sample forms for a variety of situations, which would provide the precise language to set up a typical actual transaction, such as one to be used between the principal and the intermediary. No such document is here in the book. One certainly needs to have specificity in language before turning over the proceeds of perhaps a $250K sale to an intermediary.

Also, as a CPA, I have actually done some research on this topic; Mr. Cummings has omitted the easier way to effectuate a Starker Deferred 1031 Exchange, that being where the intermediary takes the cash and then buys the target property, which is then conveyed to the "seller" of the original property. In practice,I beleive that this approach is more feasible in practice for a number of reasons. But this approach isn't in the book. Also, the book contains a lot of what I consider to be "rookie" information, things that a realty pro already know about and are experienced in handling, such as negotiating with persons who you ultimately won't be able to close deals with.

I really do not wish to be critical here, as there are no other main-line consumer guides I have located on the subject. Perhaps Mr. Cummings didn't include actual sample documents because he didn't want to get sued by the local Bar for "practicing law" or something like that. But one really needs to operate close to specific guidelines or the IRS can and will come after you.

I feel reasonably sure that an author can put in some specific recommended document language for a variety of situations, as Prentice Hall and CCH do it all the time in their books for lawyers and CPAs.

This is not to say that Mr. Cummings did not try hard; there are a lot of good things in his book. Unfortunately, there is also a lot of things which are also good, but extraneous to the main reason I and others probably purchased this book and there are, as mentioned above, quite a bit of fluff and filler. These last items include somethings which I consider to be out-and-out questionable advice, such as one example where he has suggesting that a seller ultimately allow his OWTB mortgate to become "subordinated", i.e. a 2nd trust.

5 of 6 people found the following review helpful:

4.0 out of 5 stars Focused on deal making, July 19, 2006

By 

Leo K. Scott - See all my reviews
(REAL NAME)   

This review is from: The Tax-Free Exchange Loophole: How Real Estate Investors Can Profit from the 1031 Exchange (Hardcover)

Do not buy this book if you are looking for an intro to the basics of 1031 exchanges. It is not a "how-to" book. You should buy this book if you want ideas and examples of how to use exchanging in non-standard ways to make deals happen. If you want to expand your thinking on what is flexible when you start talking terms on a deal then this is a good book for you.

4 of 5 people found the following review helpful:

3.0 out of 5 stars Good starting point for investors exploring 1031 Exchanges., July 13, 2006

By 

Bill McCann - See all my reviews
(REAL NAME)   

This review is from: The Tax-Free Exchange Loophole: How Real Estate Investors Can Profit from the 1031 Exchange (Hardcover)

This book offers a basic introduction to tax-deferred exchanges in a simple format. Readers could benefit from more relevant examples; for example focusing far less on barter-for-property and more on resources and likely issues with a delayed exchange.