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Slick TV ads often make financial planning and wealth management sound simple, but it’s usually not. Managing wealth requires knowing a lot about highly technical topics, like taxes, government regulations, and finance as well as history, psychology and how to communicate with loved ones about sensitive issues. This article highlights some of the knowledge needed to manage wealth and why it’s often so daunting without the help of an independent personal financial advisor who is familiar with your situation.
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Understanding The Federal Reserve Mandate To End Inflation
The Federal Reserve System, the nation’s central bank, has a dual mandate to pursue maximum employment and maintain price stability. These two priorities are currently treated equally, but that was not always the case. In fact, the Fed’s bias toward maximizing employment was a critical driver of the stagflation that plagued the U.S. in the late 1960s and 1970s. Recognizing the need to balance price stability and maximum employment, in 1977, Congress revised the Federal Reserve Act.
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Fed Governor Kugler Details Inflation And Economic Outlook
The 12-month inflation rate, as measured by the personal consumption expenditures (PCE) index, was 2.6% in December, down from its peak of 7.1% in June 2022, and the six-month rate for PCE inflation was even lower, at 2%, which is the target rate set by the Federal Reserve.
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Why Rates May Not Be Cut Until June
The cost of a loan to buy a home, car, college education, and achieve the American Dream is staying the same for now. As expected, Federal Reserve Chairman Jerome Powell said the central bank did not lower loan rates following the Fed’s Wednesday, Jan. 31, 2024, policy meeting.
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Practical Suggestions For Achieving Your 2024 Resolutions
New Year’s resolutions usually fail because they‘re often too hard to achieve. After six months, only 10% of people who make resolutions achieve them or remain committed to them, , according to a study by Dr. Mark Griffiths, a Chartered Psychologist and Distinguished Professor of Behavioral Addiction at the Nottingham Trent University. What can you do to make financial, medical, or other personal resolutions more likely to be achieved?
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A Sign Of Progress In Solving U.S. Economic Problems
The Federal Reserve appears to be pulling off a feat most experts did not believe it could: ending its aggressive inflation-fighting campaign of 11 interest rate hikes without tipping the U.S. economy into a recession.
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Fed Keeps Rates Unchanged; Expects Easing In 2024
To promote transparency and free markets, the Federal Reserve System began publishing the opinions of the 19 U.S. central bankers that decide interest rate policy.
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Have You Logged Into Your Social Security Account?
Have you logged in to your Social Security account? Creating an online account at SSA.gov is an important first step in understanding your retirement income situation. However, only about 60 million of the 160 million individuals in the U.S. labor force who have Social Security accounts have created a way to access the Social Security Administration’s website.
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The Great Fake Out Of 2023 Is Poised To Extend Into 2024
All year long, the economy and stock prices have fooled experts and consumers, outperforming expectations month after month.
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Test Your Financial Planning IQ
The five questions below are a challenge meant to allow you to assess your knowledge of investing, tax and financial planning. If you have been following our news stream, this quiz draws on familiar ground. The answers are below.
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Planning Briefs
How To Swap Real Estate And Defer Taxes, Maybe Forever
Published Monday, April 1, 2019 at: 7:00 AM EDT
A tax-savvy way to improve your real estate situation is to swap one property for a new one. Called a 1031 exchange, referring to its section of the tax code, this works so long as you are switching business properties. Personal residences aren't eligible.
While 1031 exchanges are often used by big commercial real estate operators, there's nothing stopping you from using the strategy for much smaller-scale holdings. The maneuver defers capital gains taxes, perhaps forever.
This takes some planning. For instance, say you have a vacation house and would like to exchange it for a property in a location that is closer to your residence. You must rent the original vacation place out for at least 14 days per year for two successive years, and in the eyes of the IRS, you have a business asset. The only caveat is that you must continue to rent out the new vacation house for 14 days over the next two back-to-back years.
A couple of more requirements: First, you must identify the substitute property within 45 days of selling the old real estate. Second, you need to buy the new property within 180 days of your sale.
The nice thing about 1031 exchanges is that you aren't confined to the exact same type of property. So, you can swap a condominium for a farm, or a house for a marina — as long as it's a business or investment property. You'll need expert advice on this issue.
The December 2017 tax-code rewrite barred applying Section 1031 to make tax-free exchanges of collectibles but left intact tax-free exchanges for business- or investment-purpose real estate.
Federal capital gains taxes now are 15% (for income of $38,601 to $425,800) or 20% (for $425,801 or more). You can postpone paying taxes for the rest of your life. And your heirs benefit, too. When they inherit the property, they get a "stepped-up basis." This means the property is valued at the market rate at the time of your death. So, the taxable amount adjusts upward. If your heirs turn around and sell it right away, they will owe little or nothing. The tax liability on the property is erased.
Of course, the swap must be a sensible business deal. Getting a tax-free sale of a profitable strip mall to buy an apartment building that has trouble keeping tenants, for example, would be a bad outcome.
Accounting the value of a property properly is another important consideration, separating a capital investment in new appliances, for instance, from the fair value of the property.
Keeping Uncle Sam's hands off the proceeds of a sale of real estate is an essential part of financial planning for owners of real estate for business, investment, or rental purposes, as well as those who rent out a vacation home as required under federal rules.
Strict timing limitations are required in a 1031 exchange. If a 1031 exchange is not properly constructed and executed in a timely manner, then an investor could lose all tax benefits of the transaction, including depreciation recapture. In addition, the property you sell must be a replaced with a like-kind property, and a Qualified Intermediary, as an independent third party, is needed to facilitate a 1031 exchange transaction and hold the funds on behalf of the investor.
Investors must also be leery of investments in private offerings created to sell 1031 exchange transactions. These are often illiquid investments, and do not offer guarantees of income or that your investment objectives will be met. They may be speculative, and you could lose some, or all, of your principal investment.
This is neither an offer to sell nor a solicitation to buy any security, which may be made only in an official offering memorandum. Investors should read any offering memorandum and review any risks associated. This article does not include all material information to determine whether to conduct a 1031 exchange. 1031 exchange opportunities are available only to accredited investors. Investors must be qualified prior to any discussion of a current or contemplated offering.
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