by Joseph Garnett | Sep 29, 2018 | Copyeditng
Make an Economic Impact on Your Community with a 170 Exchange
Edited by Joseph Garnett, Jr. – Written by Mike Wolfe
While the bargain sale can bring cash and tax savings to a business, its economic impact often makes a real difference.
Statista.com, an online statistics service, says American cities have high vacancy rates. That rate is projected to be 32.9% in 2017 for industrial, retail and commercial buildings. We all know hard-hit cities like Flint and Detroit, MI, but there are many smaller less-known communities with similar problems.
In Huntsville, Alabama, city leaders are considering a rezoning effort to spur growth in the Cummings Research Park to stimulate the economy in that area. There are also plans to develop a start-up village for businesses.
Tampa, Florida is also experiencing a revitalization of the collegiate areas in north Tampa, where some properties have remained vacant for years. The project to revive the area includes transforming several structures.
A 2014 HUD (the US Department of Housing and Urban Development) report shows that Pittsburgh, Pennsylvania repurposed an empty lot into a “greening” project for local youth and McAllen, Texas converted an empty “big box” store into a library.
How can a 170 Exchange help your neighborhood? Think about a vacant building and how it is generating no economic energy at all. Imagine that you have connected with a nonprofit which turns the building into a library or housing for the homeless. Or perhaps the nonprofit repurposes your building into a hub for entrepreneurs to create their innovations.
170 Exchange Economic Impact Creates Jobs, Revitalizing Community
All the situations above generate jobs, providing for the community, and saving money for the city. For example, creating housing for homeless can revitalize a city in decline. Many times, government funds or grants can be work in tandem with your donation to complete the entire project for the nonprofit.
Perhaps, your company has been having trouble selling a vacant building and this year you’re expecting a large tax bill. Consider structuring a 170 Exchange with a qualified charity, who may then be able to repurpose that building to house any number of uses that benefit the area where you live or work.
Maybe you believe your property needs too much work to be useful the way it is, then it might be good for “deconstruction” where a building is demolished, removing all reusable materials. What you are left with is a new usable space which could be used for a garden, a park or even a new building.
You may think a park wouldn’t stimulate the economy; think again. A park would need maintenance and security, which would create employment immediately. Additionally, a pool or community area would also create permanent positions for lifeguards, administrators or recreation specialists.
The cash and tax benefits of a 170 Exchange are very attractive, and making a charitable contribution looks good too. But this new way of looking at your property – repurposing – entices businesses in another way. Everyone wants to boost our economy. And, being one of the organizations that accomplish this, makes the company profile stronger, and receives its own economic incentive.
Let’s review how:
With a 170 Exchange, often referred to as a Bargain Sale, the seller finds a nonprofit buyer. The participants exchange the property for an agreed amount of cash at closing, while the seller receives considerable tax credits. For companies with large tax liabilities, this equates to sizable cash infusions in the form of tax relief.
A repurposing project through a nonprofit for a hard-to-sell property brings economic advantages to your community. This process is definitely a win-win scenario for all parties involved.
by Joseph Garnett | Sep 29, 2018 | Copyeditng
Edited by Joseph Garnett, Jr. – Written by Mike Wolfe
Becoming an MAI appraiser is no easy task. The MAI designation means that an individual is affiliated with the Appraisal Institute, a highly esteemed worldwide organization for real estate appraisers. Designated members of the Appraisal Institute, or MAIs, have to jump through several hoops to prove their knowledge and sound moral character to get the designation, including fulfilling specific educational and professional requirements. Here, we’ll break down all of the different elements to becoming an MAI appraiser.
Getting to be an MAI-Designated Appraiser: Education Requirement
First, an appraiser must have extensive real estate knowledge and an in-depth understanding of the appraisal process. To prove this knowledge, an appraiser must have:
- An undergraduate degree: All MAIs must have an undergraduate degree. This degree can be in any subject, but it must be from a fully accredited four-year university.
- A passing grade on 13 different examinations: MAIs must pass a series of rigorous tests. These exams cover advanced income capitalization, advanced market analysis, HBU, and quantitative analysis. These exams include a total of 400 hours of classroom instruction and demonstrate that an appraiser has a comprehensive knowledge base.
- A passing grade on the General Comprehensive Exam: In addition to the 13 exams mentioned in the above point, all MAIs must also pass a General Comprehensive Examination. This intense two-day, four-part modular exam is notoriously challenging, as the scope of the topics examined is quite broad. The exam can cover pretty much anything in the Appraisal Institute’s required examinations, current appraisal literature, and the Appraisal Institute’s Bylaws and Regulations, which means that candidates must be thoroughly prepared.
Getting the MAI: Experience Requirements
To become an MAI-designated appraiser, candidates need more than just comprehensive, in-depth knowledge. They also need professional experience. To receive the designation, an appraiser must have credit for a minimum of 4,500 hours of specialized experience. The appraiser accrues the background over a minimum of three years. The experience ensures that those who receive the designation have a considerable amount of experience under their belts. Lastly, to prove their experience, candidates must also complete a demonstration report. This report ensures that they can fluidly write, substantiate, and defend a value proposition. Anyone with an MAI designation isn’t just an expert at the technical aspects of appraisal but also knows how to protect that value, a crucial skill.
The Value of an MAI in a 170 Exchange
When it comes to the 170 exchange, it can be incredibly advantageous to have an MAI on your side. An appraisal is a key part of the process. Getting a high appraisal is key to maximizing the value of the transaction. These experts have the experience and knowledge necessary to succeed in even the most stressful situations, helping ensure that you can get the right appraisal for your property and maximize your return.
Nick Chop’s full blog post can be found here.
by Joseph Garnett | Sep 29, 2018 | Copyeditng
IRS Section 170 Bargain Sale and its Conditions
Edited by Joseph Garnett, Jr. – Written by Mike Wolfe
As our regular visitors know already, the 170 Exchange is an amazing transaction by which an investor gets to do a good deed. The investor also cashes in on a dated real estate property’s value and receives a considerable chunk of very real immediate tax rebates. Consequently, the investor helps nonprofit organizations and the entire community. This process is truly an amazing opportunity for all involved. An ultimate win-win situation. It is not enough, however, to find a nonprofit and make the sale. Some conditions must apply for the businessperson to donate to get the tax benefits from the deal. Those conditions are outlined in the IRS Section 170 Bargain Sale, also known as the 170 Exchange.
To execute an IRS Section 170 Bargain Sale, certain conditions must be met. Conditions such as the seller must have a significant tax liability, and the buyer must be a nonprofit.
The Specifics of an IRS Section 170 Bargain Sale
The general outline of the deal is simple – a commercial real estate owner sells a piece of the property below its fair and full market value to a charitable organization. The difference between the sale price and total property value is the sum to be deducted from the donor’s income.
But there is more that needs to understand about the IRS Section 170 Bargain Sale. First, there is a list of commercial properties that can be a part of the 170 Exchange. Then there is the value assessment, which will be influenced by things like mortgages attached to the property, which will reduce the amount you can claim for the rebate.
Additionally, the entrepreneur should have a sufficient level of taxable income to qualify. There is also a list of federally recognized 501(c)(3) entities, which are the only nonprofits allowed to participate in the 170 Exchange transaction on the buyer side. Finally, there should be two appraisals—one by an MAI Designated appraiser to evaluate it conducted within 60 days of the sale.
The Benefits of an IRS Section 170 Bargain Sale
Its incomparable benefits dictate the restrictions on the deal. Unlike the 1031 Exchange, the 170 Exchange offers not a deferral of taxes but an immediate rebate on the donated sum. Moreover, there is a significant chance of significant tax deductions from the Exchange for up to 5 years. The deduction, in addition to the immediate tax gain for sale.
Conclusion
If you want to learn more about this fantastic transaction, you came to the right place. We at The Welfont Group specialize in connecting entrepreneurs with nonprofits for this purpose. Ours is a long-standing record of excellence and diligent service. We help business people and nonprofits connect and benefit from each other and the entire community. Whether you are a commercial real estate owner wanting to donate or a nonprofit looking for donations, call us now, and we will be glad to assist you.
by Joseph Garnett | Sep 29, 2018 | Copyeditng
Edited by Joseph Garnett, Jr. – Written by Mike Wolfe
If you like the 1031 Exchange, you will love the 170 Exchange™, also known as a Bargain Sale. You’ve probably heard of the 1031 Exchange. But, have you heard of the 170 Exchange? Let’s take a look at the specifics by comparing the 1031 Exchange and 170 Exchange 1031 Exchange. Also, we’ll explore information on how they may be able to maximize selling outcomes when used together.
Comparing the 1031 Exchange and 170 Exchange
Most commercial real estate brokers and their clients know the 1031 Exchange well. This exchange allows investors to sell existing property. Then, the seller can use the proceeds to buy new property without having to pay any capital gains tax. The IRS Section 1031 (a)(1) explains that the seller’s property must be exchanged for property of like kind. Also, the seller must hold the property for productive use.
“No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.”
The IRS insists that all of conditions be met to qualify for a 1031 Exchange. Meanwhile, experts at Welfont coined the term The 170 Exchange. What happens in the bargain sale, which is the 170 Exchange, a seller sells a property to a charitable group at significantly under market value. The difference between the sale price and the assessed market value may be able to be written off as a tax deduction. Ideal for hard-to-sell properties, a 170 Exchange can be especially valuable in helping the seller maximize profit.
170 Exchange: Maximizing Seller Outcome
At Welfont, our experts may be able to assist you in pairing the well-known 1031 Exchange with the lesser-known 170 Exchange to maximize profit. If the rules properly followed, the 170 Exchange allows the seller to divest property held in a 1031 Exchange. Depending on the transaction specifics, sellers can cash in their chips and may be able to pay little to no capital gains tax.
Please visit www.welfont.com to learn more about how the 170 Exchange may be able to help you or to seek the help of tax professionals.
