Using a 1031 Exchange

A 1031 exchange allows you to defer the payment of capital gains taxes associated with real estate transactions. By selling one property and buying a higher-priced property, you can also get additional depreciation deductions, which can act to increase your after-tax income.

Only a few simple rules must be followed in order to qualify a real estate transaction as a 1031 exchange. First, only property held for business or investment purposes can be used in a 1031 exchange, and both properties in the transaction must be of "like kind". Like kind property is real estate or other tangible property that is similar in nature or classification.

It can be frustrating wading through online information on the 1031 tax exchange and how it can benefit you.

What are the tax advantages in a 1031 exchange?
You can defer the payment of capital gains taxes associated with real estate transactions. By selling one property and buying a higher-priced property, you can also get additional depreciation deductions, which can act to increase your after-tax income. In addition, you can eliminate paying taxes on the recapture of depreciation you've taken on the property.

Can I use my primary residence or second home in for a 1031 exchange?
No, only real estate property held for business or investment purposes can be used in a 1031 exchange, and both properties in the transaction must be of "like kind".

What is meant by "like-kind" property in a 1031 exchange?
Like kind property is real estate or other tangible property that is similar in nature, characteristics, or SIC classification in a 1031 exchange. Whether two properties are of "like kind" can also be dependent on state law.

Can I sell or buy multiple properties in a 1031 exchange?
Yes, you can exchange multiple smaller properties for a larger one and vice versa. The key is always trade up in value in order to maximize the amount of capital gains taxes that are deferred.

Are their time restrictions on a 1031 exchange transaction?
Yes, there is a 180-day time span in which the 1031 exchange must take place. During this period there is also a 45-day period where the exchanger must identify which replacement property will be purchased.

How can I defer the maximum amount of capital gains tax in a 1031 exchange?The main rule is that the replacement property being purchased must be equal or greater in value to the relinquished property being sold. The net effect must be that the entire net proceeds from the sale must be used to purchase the replacement property.

Does one receive cost basis for the replacement property?
No, cost basis from the relinquished property is carried forward to the replacement property in a 1031 exchange. This is one drawback and is often overlooked or misunderstood.

What is a Qualified Intermediary and must I use one in a 1031 exchange?
The Qualified Intermediary (QI), also called an accomodator, is a third-party that facilitates the transaction and is required by the IRS to qualify a 1031 tax exchange. The IRS does not allow your accountant, attorney, or escrow company to act as the QI.

Can I do multiple 1031 exchanges and avoid paying taxes altogether?
Yes, by continuing to sell and buy like-kind properties and following 1031 exchange rules, your estate when you die can avoid paying capital gains taxes.

Slow Market? Sell The Deal, Not House

by M. Anthony Carr

If you find yourself with a house on the market and it's just not moving, there are several strategies to put in place to speed up the sale and get going with your next purchase.
Psychologically, the seller has to first prepare himself for selling the house -- not marketing it, not holding out for a higher price, not defending your price, not blaming your agent for not doing enough, etc.

Granted, all the above is important and you do want a professional agent with a viable marketing plan to draw as many buyers as possible. Just like any other commodity -- a lot of buyers trouncing through your house is a good thing, because more buyers means more potential offers. Thus, the seller needs to hire a company/agent that's going to create such an environment.

But let's say you've done that. You've even fixed up the house better than anyone else on the block and it's just not moving. Then move from selling the product to selling the deal.
We see this strategy in plenty of other products. The auto industry is famous for it -- zero percent financing, $500 above invoice, employee discount price … none of these items have anything to do with the product -- they are enticing you with the deal.

The Deal for real estate has everything to do about the buyer. Forget that you may still be in a sellers market and you're in the drivers seat. If your house is sitting on the market and you have to move in 45 days -- you're not so much in the drivers seat anymore. Get off your haunches and get the job done.

You could drop the price, but in reality, this doesn't help the buyer as much as cash back at the settlement table.

For every $10,000 you drop on a loan at 6 percent, the buyer saves only $60 per month in a mortgage payment. Is that really enticing enough? Think about it, they're borrowing $250,000 -- a quarter of a million dollars -- and you're dropping the price by $10,000 reduces their principal and interest payment from $1,498 to $1438.

Is that one move enough to get me excited?

Let's turn that around and offer $7,500 (3 percent of the loan amount) over to the buyer -- at a full price contract -- and see what it does for the buyer. They could use it for closing costs, which could be a lot of money in their pocket. They could use it to make payments over the next several months (nearly five months worth of payments at the above mentioned payment amount). Is that really more beneficial than $60 per month?

By dropping your price $10,000, it would take them more than 10 years worth of monthly payments to gain the actual financial benefit of simply handing over $7,500 in closing costs to them at the settlement table. Plus, you get to keep the remaining $2,500 for your own bottom line.

It's like this. If you're about to take a hit on the sale of your house, it might as well benefit someone, and the buyer who gets $7,500 at the table is going to get a lot more excited than the one who's price dropped $10,000.

Be sure to check with your mortgage professional to make sure the loan program your buyer is using will allow you to provide this much cash to the buyer.

One last thing. If you decide to market the deal, make it a lot more appealing than "closing costs to buyer." How you say it can be just as important as what you're saying: "No payments for 4 months," "$7,500 back to decorate your house," "Seller will pay off buyers debt (up to $7,500)," are three ways of saying, "Closing costs to buyer."

Which one gets you excited?

Seven Records Broken in Sale of Champions at Iowa State Fair

Reserve ChampionFFA Market

Samantha Sell, Glenwood $12,500
Buyer: Featherlite, Inc.; Midwest Club Lamb Producers; Blue Grass Shows; Old West Barbeque, Pioneer; $6,300 local support


When the gavel fell silent and the sale ring was cleared for the final time, $182,900 had been raised in the 4-H and FFA Sale of Champions August 20 at the 2005 Iowa State Fair. Seven new record prices for the champions were set.

When added with the $88,500 of scholarships and performance and carcass awards, $271,400 was awarded to young livestock exhibitors through the auspices of the Iowa Foundation for Agricultural Advancement.

Seven new records were set during the bidding including Reserve Champion 4-H Market Heifer, Grand Champion 4-H Market Hog, Grand Champion 4-H Derby Hog, Reserve Champion FFA Market Hog, Grand Champion 4-H Market Lamb, Reserve Champion 4-H Market Lamb and Grand Champion Broiler Pen.

Participants in the Sale of Champions were asked to find hometown supporters to set a floor price for bidding. The purchaser paid the difference between the floor price and the final sale price.

After the sale, a check written for 80 percent of the animal’s sale price goes to the exhibitor. The remaining 20 percent is retained by the IFFAA for the scholarship program and Sale expenses. In addition to their sale proceeds, the exhibitors of the Grand Champion FFA Market Lamb, Grand Champion 4-H Market Hog and Grand Champion 4-H Market Steer each receive the use of a new aluminum livestock trailer for one year courtesy of Featherlite Trailers of Cresco.

Property TaxHikes Ordered for Pottawattamie, Mills Counties

BY TOM SHAW
WORLD-HERALD STAFF WRITER

Homeowners in Pottawattamie and Mills Counties could be in for bad news on their property tax bills next year.

The Iowa Department of Revenue has tentatively ordered across-the-board valuation increases of 12 percent on all residential property in the two counties. That's because property assessments in those counties seem to lag behind the housing market.

The order could mean hundreds of dollars in extra taxes, if the Iowa Legislature doesn't adjust the complicated formula for figuring property taxes on homes.

Statewide, the Department of Revenue has proposed an average 7.3 percent increase for residential property, a 3.3 percent increase for agricultural land and a 5.1 percent increase for commercial property. The purpose of the orders is to equalize assessments and ensure that properties are assessed at actual value.

The state reviews assessments every two years. In 2003, the state left residential valuations alone in Pottawattamie County.

Counties have a chance to appeal the orders next month. Any changes would not take effect until next year.

Variables used in Iowa's complicated formula for deciding property taxes could change by then. Two state programs - the rollback and homeownership credit - reduce the taxable valuation of homes by about half. The programs are reviewed regularly by the state Legislature.

The state's proposed 12 percent increase would mean a property tax increase of just under $300 for those living in Council Bluffs and the Council Bluffs School District with a home valued at $100,000.

That would be at the current tax, rollback and homeownership credit rates. Local governments and school districts determine their tax rates based on budget needs.

Pottawattamie County Assessor Steve Palm said he does not plan to appeal the proposed state order. He said he does not have the staff to review all residential properties every two years, as required by law. Palm also said the sustained real-estate boom has caused property to increase in value.

"The whole thing is based on sales," Palm said, adding his office has reviewed hundreds of sales records.

The median sale price for a home in the Council Bluffs or Carter Lake area increased 13 percent from the first seven months of 2004 to the same period this year. The median price went from $99,000 to $112,125, according to the Southwest Iowa Association of Realtors.

For all of southwest Iowa, the increase was 12 percent - from $97,850 to $110,000, according to the association.

John Jerkovich, president of Heartland Properties, and Randy Carroll, a Heartland sales associate, said they've seen an increase in the number of high-end home buyers coming to Council Bluffs from the Omaha area.

The reasons cited by the homebuyers are a shorter commute to downtown Omaha and lower taxes.

The Bent Tree development on the outskirts of Council Bluffs, with homes from $450,000 to $900,000, has had a number of relocations by ConAgra and Union Pacific employees, Jerkovich said.

Southwest Iowa Association of Realtors President Sharon White said new home construction and people upgrading their homes also have had a big impact on the housing market.
Pottawattamie County has about 35,000 residential properties. Palm placed an increase of less than 1 percent on some of those residential properties this year. The state order would be on top of that increase.

Mills County also would see a 12 percent increase in residential valuations under the proposed state changes. That would be on top of a less than 1 percent increase in valuations for homes in the county from the assessor.

Mills County officials had not yet decided whether to appeal the proposed increase, said assessor Christina Govig.

Crawford County faces an 11 percent increase in commercial property taxes from the state. That increase would have an impact on 640 commercial properties and would be added to the less than 0.5 percent increase from the assessor.

Crawford County Assessor Duane Zenk said he believes some of the 11 sales reviewed by the state are not the best indicators of property value in the county. But he will not appeal the state order because state officials already told him they will not take the sales out of their review.
"It's not the best system . . . but it's something that we have to live with," Zenk said.

Agricultural property in Pottawattamie County would see an increase of 7 percent under the proposed state order. Palm said the state dropped agricultural valuations in the county two years ago.

Mineola 125th Anniversary Events Schedule!

SCHEDULE OF EVENTS
-SEPTEMBER 3RD -

COFFEE & DONUTS • starting at 9 am Mineola Community Center
FLEA MARKET • 9 am - 4 pm St. John Lutheran Church north parking lot
QUILT SHOW & HAT DISPLAY • 9 am - 4 pm St. John Lutheran Church
RURAL SCHOOLS REUNION • 9 am - 1 pm Mineola Community Center
QUASQUICENTENNIAL CANCELLATION STAMPS 9 am - 2pm Mineola Post Office
MINEOLA STEAK HOUSEOPEN FOR LUNCH BEER GARDEN • Opens at 11 am
HORSESHOES • 11 am - 1:30 pm south of the Mineola Fire Station
PARADE • line-up at 1 pm, starts at 2 pm sign-up at the Mineola Bank
CAR & TRACTOR SHOW • 3 pm Main Street in front of the Mineola Steak House
HORSESHOES • 3 pm south of the Mineola Fire Station
BINGO • 3 pm - 5 pm at the Mineola Fire Station
CHILDREN'S Activities & Carnival • 3 pm - 6 pm at the west end of Main Street
THE POLKA DUDES BAND • 3 pm - 6 pm will perform at the Mineola Community Center
BBQ DINNER • 5 pm buffet style, served in front of the Mineola Community Center - catered by Clay and Suzette Deitchler
THE BRISTOLS BAND • 7 pm - 11 pm performing behind the Mineola Steak House

2005 Glenwood Rams Varsity Football Schedule

Friday 8/26 7:30 Shenandoah (away)
Friday 9/02 7:30 Underwood (away)
Friday 9/16 7:30 Harlan (home)
Friday 9/23 7:30 Lewis Central (homecoming)
Friday 9/30 7:30 Denison (away)
Friday 10/7 7:30 Creston (away)
Friday 10/14 7:30 Atlantic (home)
Friday 10/21 7:30 Carroll (home)
Friday 10/28 7:30 Jefferson (away)

NP Dodge Promotes New Broker to Glenwood Office

NP Dodge Real Estate announces the promotion of Jeff Martin to Managing Broker of the Glenwood, Iowa sales office, located at 201 S. Locust St.

Jeff was born and raised in Southwest Iowa and has been a licensed Realtor since 1992. He obtained his broker's license and owned his own company until merging with NP Dodge in July of 2004.

Mr. Martin will be responsible for overseeing the day-to-day operations of the Glenwood office. He is an active member of the Southwest Iowa Association of Realtors, where he sits on the board of Directors, Professional Standards Committee, and is chairman of the MLS Committee.

The NP Dodge Glenwood sales office has a total of 10 agents. NP Dodge is a family owned company celebrating its 150th year of business in 2005. They currently maintain 14 offices in Nebraska and Iowa and have over 450 sales associates.

Protect Your Home Against Tornado Damage

Even if you live outside “Tornado Alley,” the area of the country that runs north from Texas through eastern Nebraska and northeast to Indiana, you are still vulnerable to tornadoes. Kansas, Oklahoma and Texas may see more of these unpredictable and dangerous storms than other states, but the rest of the country also gets its share of twisters. You don’t have to be blown away when nature lets loose. It’s never too early to prepare and you can take several basic steps right now to protect your family and your home from disaster....

Read Full Story ->

Meeting the Seller Could Affect Deal

by M. Anthony Carr

Realtors must take care how they approach the buyer and seller client of another real estate professional. To contact a seller directly, for instance, when the seller has listed his or her house with another agent, could be construed as "going behind the sign," as it's called in the industry and violates the National Association of Realtors' Code of Ethics.

On the other hand, it's not uncommon for buyers and sellers to meet each other and talk real estate, the transaction, moving plans, remodeling -- er -- be careful about that last one. It's true -- all the topics above may or may not cause a hubbub between a buyer and seller, but when you start discussing remodeling plans -- buyers beware.

See Full Story

LAKE OHANA - "Your Family's Destination"

"OHANA", the Hawaiian word for "family", is what this lakeside community is all about. Nestled in the Loess Hills of southwest Iowa, just 15 minutes from downtown Omaha, this planned development revolves around the family. With all of its improvements geared around relaxing, country and outdoor living, Lake Ohana is more than just a place to call home, it's the perfect family destination.

Lake Ohana is truly one-of-a-kind. Offering incomparable building sites and carefully planned amenities to complement its natural assets, this development is definitely the first of its kind in the surrounding Omaha/Council Bluffs area.

The development's three lakes, meandering trails and green spaces yearns and beckons to be explored and used by its homeowners.Due to the diverse topography, each lake has its own unique characteristics and is being developed for specific uses.

• The 100+ acre lake will be fed via natural springs by Pony Creek which is a continually flowing live stream. Over a mile long, Lake Ohana is perfect for the avid water sports enthusiast. Its lakeside homeowners will enjoy having the option of having their own boat dock right outside their backdoor. Other homeowners will have the use of a private boat ramp. Future planned amenities include a marina with a full service restaurant and a clubhouse.
• Encompassing almost 30 acres with its green spaces, the 20 acre no-wake lake is geared towards the more peaceful and serene side of lakeside living. At over 40 feet deep at its deepest point, the stocked lake will become a favorite for homeowners who like to fish, and with its perimeter walking trail and park-like setting, it will provide for countless hours of frolicking and picnicking for its privileged homeowners.
• The five acre aesthetic lake will be a perfect setting to relax after a busy day at the office. As you unwind with your spouse, your children will love exploring its shores.
  Ohana Ridge, the initial phase of this development, is an entirely seperate subdivision.
• Available now, these 1+ acre lots will be the initial phase within the Lake Ohana subdivision. All lots are planned to have rural water, sewer, and underground utilities including propane.
• Phase 1B is anticipated to be completed in the Fall of 2005. In addition to the amenities in Phase 1A, these lots will have an extensive trail system as well as a 5 acre community park.
• Planned with a "village atmosphere", the 5 acre commercial complex will be developed with a sense of community. With numerous green spaces and individual architecturally-designed buildings, this area is destined to become not only a gathering place for the immediate community, but also the surrounding area.

Customize Your Home with Tile

by Phoebe Chongchua

The next time you plan to tile an area in your home, instead of running to a tile store to pick out everyday squares, you might consider pulling out and thumbing through a box of your favorite photographs.

A San Diego company that specializes in visual legacies imbeds your artwork or photographs right into tiles, creating a customized look for kitchens, walkways, pools, bathrooms, fireplaces and other areas.

"I do everything from marble, tumble stone, glass, frosted glass on up to regular ceramics and then the ceramic tiles are in matte finish, satin finish and glossy," says Toni Renier of Square Meadows.

Whether it's photos you took of Yosemite waterfalls or a beautiful view of the Amalfi Coast that you captured and now want turn into tiles to put in your shower, in your kitchen for a backsplash, or simply to hang on your wall, tile photos can add a very personal touch to your décor.

Square Meadows can use your photos to create the desired look for a particular room. However, the actual photo is not put on the tile. Instead a special ink is used that turns into a gas when it is heated. The tile is treated with a special coating to allow the ink to become imbedded into the tile.

Renier says "What you do is scan the photo or create the artwork in Adobe Application, Illustrator, Photoshop or whatever. Then it gets printed out on a special paper that allows the ink to sit up on to the paper as opposed to being absorbed into the paper. Then you put it in a heat press and it depends on the tile how long and how you press it, but it gets placed in there at about 450 degrees. Once that pressure and the heat are happening, the gas then permeates the tile and the image then is permanently imbedded into the tile."

Depending on the project, the process can take a week to several weeks to complete and the cost varies from hundreds to thousands of dollars, depending on the size of the project.
"Because I am a graphic designer and artist/illustrator, I can design whatever for you. So if you had something in mind -- a vision of what you wanted a certain area to look like -- I can illustrate it or design it, lay it out and do the graphics for it and then blow it up and separate it into the tiles," says Renier.

While the tiles are very versatile, Renier cautions that some environments aren't the best because just like photographs, the tiles can fade over the years.

"If you're taking it and you're putting it outdoors where it's going to get direct sunlight on a constant basis and a lot of heat -- I mean if you're in Tucson, Arizona and you do your pool -- you're looking at about probably only a three-or-four-year shelf life, if that," says Renier.
However, when the tiles are used indoors and out of direct sunlight and heat, Renier says they should last 50 years.

One important note, you're on your own for installation of the tiles. Renier says when you or a worker installs them make sure to use a non-sanded grout, "The sanded grout tends to scratch the tile more." Also seal with a top coat to protect the tiles.

Home Sales Near All-Time Peak

Chief Economist David Lereah, in a monthly forecast, nudged his estimates higher for sales of previously owned and new homes in 2005.

He said existing home sales should rise 2.9 percent to 6.98 million this year, up from his previous forecast of 6.97 million and higher than the 2004 record of 6.78 million.
Sales of new homes should climb 4.8 percent to 1.26 million in 2005, which also would be a record high, the realtors' economist said.

Housing, now in a boom of more than four years, has defied economists' expectations for a slowdown this year as long-term mortgage rates remain stubbornly low. That has led economists over the past two months to boost their 2005 targets and forecast another record year for sales and construction.

But fixed 30-year mortgage rates have begun to trend higher over the past five weeks, according to mortgage finance company Freddie Mac. Industry analysts also have begun to point to anecdotal evidence of slowing sales and rising inventory of homes available for sale in some of the priciest areas.

Lereah said home sales should begin to ease off record levels during the second half of the year.
"The housing market is probably close to a peak right now in terms of sales activity, but there is tremendous momentum," he said.

IWCC 2005 Balloon Fair

On the Campus of Iowa Western Community College.
August 19,20& 21, 2005
Free Admission!





TENTATIVE SCHEDULE

Friday, August 19

5pm-9pm
Food & Beverage ConcessionsCreative Celebration Inflatable RidesFast & Furious Micro-Reality NASCAR racingUnder the Big Top - Artists/Vendors/ExhibitorsClowns & Face painting

6:30pm-8:30pm
Balloon WalkTethered RidesSerena's Song - Handicap accessible tethered balloon rides - sponsored by Craig H. Neilsen FoundationSky diving demo

7pm-7:45pm
The Magic of Jeff Quinn

8:30pm
Balloon Glow2 Balloons at Ameristar
(sunset at 8:17pm)

9pm-10pm
Live music by the Nace Brothers


Saturday, August 20

7am
Balloon AscensionSerena's Song-handicap accessible tethered rides - sponsored by Craig H. Neilsen Foundation(sunrise at 6:39am)

7am-10am
Pancake Man Breakfast

8am-9pm
Under the Big Top - Artists/Vendors/Exhibitors

9am-4pm
Hot Air & Horsepoer - Show & Shine Car/Bike Show

4:30pm-5:30pm
Pilot/Crew Picnic

5pm-9pm
Food & Beverage ConcessionsCreative Celebration Inflatable RidesFast & Furious Micro-Reality NASCAR racingClowns & Face painting

6:30pm-8:30pm
Balloon WalkTethered RidesSerena's Song - Handicap accessible tethered balloon rides - sponsored by Craig H. Neilsen FoundationSky diving demo

6:30pm
Balloon Ascension
(sunset at 8:15pm)

7:30pm-8:30pm
Magician - The Amazing Arthur

8:30pm
Limited Balloon Glow

9pm
3rd Annual Fireworks Display sponsored by Feltz Wealth Plan


Sunday, August 21

7am
Balloon Ascension
(sunrise at 6:40am)

6am-9am
Free Panera Bagels to the first 500 attendees Under the Big Top - Artists/Vendors/ExhibitorsPing-pong raffle drop

8am-10am
Serena's Song - Handicap accessible tethered balloon rides

11am
Awards Brunch @ Ameristar (pilots, crew, committee, and sponsors only) (if no flight, brunch moved to 10am)

Mineola Subdivision Encounters A Snag

BY JOHN FERAK
WORLD-HERALD STAFF WRITER

The Iowa Department of Natural Resources has told the developer of the largest subdivision ever proposed in Mills County to take corrective action or face fines and a slowdown.

A department investigation in July determined that the Lake Ohana housing development west of Mineola, including a future lake and dam, is being constructed without proper storm-water management and soil erosion controls.

As a result of the permit violations issued July 19, developer Craig Nakamoto must resubmit his storm-water pollution prevention plans, said Thad Nanfito, a resources department environmental specialist.

Nakamoto could not be reached for comment.

In late May, the Mills County Board approved construction of the first phase of the 350-unit project, about two miles west of Mineola and five miles north of Glenwood.

About a dozen houses already are under construction.
Nakamoto's 700-acre development calls for three private lakes, including a 120-acre lake for watercraft and recreational boating. A four-acre parcel includes a business corridor for a bank, restaurant and convenience store.

As Nakamoto resolves the violation, he also is trying to work out plans to have his development served by a municipal sewer treatment system.

Earlier, he contracted with the Glenwood Utilities Board to extend water lines there.
Nakamoto wants his development included in the proposed Mills County Urban Renewal Plan for Barrus Road and 230th Street. An urban renewal plan is the first step needed to create a tax increment finance district.

In such a district, property taxes are frozen for several years to help pay for public infrastructure improvements. Tax increment financing would pay for a new wastewater collection treatment system to serve both the unincorporated town of Mineola and Lake Ohana. Homes in the town of about 200 have inadequate septic systems because of small lots.
If the wastewater treatment plan remains unresolved for too long, Nakamoto's development would have to offer private septics, said County Board member Joe Blankenship.

"The water is already on its way," Blankenship said. "The sewer system is still the biggest obstacle. The whole thing hinges on Mineola getting the money for the federal grant."
Mineola's effort to receive a federal grant last year was turned down, he said. Another application has been submitted.

In recent weeks, several rural landowners have asked Mills County to provide more oversight and scrutiny to Nakamoto's development.

"We don't want it overbuilt and not done properly," said area resident Paige Sowers. "If a municipal sewer is in place, he could easily build 700 houses out there. Who's to say he wouldn't change his plans at that point?"

Blankenship said the county will review all four phases of Nakamoto's subdivision plans.