The Outlook for British Virgin Islands Real Estate – Predictions and Opportunities

The unlimited recreational activities in BVI include tennis courts, horseback riding, mountain trails and coral reefs. The climate of BVI is sub-tropical. The winter temperature ranges from 22-28 degrees while in summers it stays around 26-31 degree centigrade. The total population of BVI is 20,000.

The economy has been very stable for BVI which has been a major driving force to attract the investors to the real estate in BVI. Along with financial services, the tourism industry has played a major role in developing the economy of this island. The total national income comprises of 45% of tourism income and BVI attends almost 350,000 visitors. These visitors are usually from Canada and USA. Due to the interest of tourists, BVI has developed sound and secure international listings to give various options including villas, cottages and condominiums with very attractive international rentals.

Over the last couple of years, the financial distress led to the melt down of setback as well which also affected the banking sector. The major sufferers were European and North American investors that are still struggling with their economies. Many banks in EU have not been able to pass the stress test which clearly indicated the distressed economy for this year too. However, this huge downfall in the internal real estate did not affect much on BVI which shows a positive trend for BVI.

The international real estate for sale includes a large number of options from BVI due to the following reasons which prevails on this island hence making it a most wanted place for tourism:

1. The GDP per capita and standard of living has been maintained along with stable political infrastructure in BVI.

2. The economy of BVI is exempted of any company, capital gains and personal taxes which are highly attractive for the investors. Along with this, the BVI rentals and very low property tax has been able to create a good exposure for the investors in BVI. For this reason, the international real estate exchange has been maintained in order to give more housing opportunities to investors.

3. Even though the real estate in BVI is very small and insignificant but the presence of landholding license system has helped develop a sustainable BVI for sale.

After the evaluation of these factors, it becomes clear that no matter how much the economy for adjoining British and North America is distressed, the BVI listings will always have the best property buying options. Even though the island is small and the demand exceeds the supply, but still BVI has been able to offer a lot on the international real estate for sale platform. The international agents are pretty much hopeful about the sustainability of the property industry in BVI.

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Tax Deferred Exchanges of Investment and Business Real Estate

The Primary Residence taxation, the Residential Replacement Rollover, Sec. 1034 exception is gone. Previous capital losses still apply, if the property is held as investment property and sold at a loss and that loss can be carried over for up to 7 years. For those over age 55 the primary residence or residential sale exclusion of taxation is gone. Tax deferred exchanges remain a viable way of deferring taxation on investment real estate.

It is required to analyze and pre plan prior to transaction. That analysis must be done by an updated tax deferred exchange professional such as those we have on retainer. Not only do you need a tax attorney, but a real estate attorney, and an expert attorney working with them – that is a specialist in only tax consequences; especially those of tax deferred real estate transactions. There must be proper forms and written documents before the transaction is done. This requires planning and a review of limitations as well as a formal and professional critique of assumptions and decisions.

Most Realtors, Attorneys and CPAs do not have sufficient expertise to guide you in a legitimate and defensible tax deferred exchange. The key here is defensible, as the IRS will usually audit the tax deferred transaction and if it’s done correctly so that it is easily defensible you will sail right through the audit for little or no money. Your personal tax profile and that of your other business and family identities must be factored in the decisions. It may be necessary to legally refigure, adjust, and compartmentalize your purchase or sale – and document that appropriately, BEFORE you begin to put any part of the transaction in writing. Planning is legally done BEFORE and if it is done after the transaction you can be liable for fraud. The IRS does not take kindly to fraud especially regarding real estate.

For instance you must know your straight line depreciation factor; for investment property that is currently 39 years. For instance: Any depreciation taken during the ownership of the property will be picked up in a recapture tax upon the sale of the property.

Federal and State taxations must be combined properly, according to numerous factors that must be researched by your team of advisors. Since the total taxation on the gain is approximately 35% of the gain plus the recapture tax – your fees to professionals can be well worth it to you if they better your tax situation. The tax deferred technique can defer till later or eliminate your tax payment and consequence. Of course the only real and usual way to eliminate the tax is to die. There are ways to defer the tax however until that death. Tax deferred strategies are sometimes called alternative strategies or alternative tax deferment strategies.

Note: if you are speaking with anyone and they speak of TAX FREE EXCHANGE or TAX FREE SALE of your property, they are not well informed and thus you should be wary of any other advice they give you. There is, effectively, no such thing as a tax free sale or tax free exchange of real estate.

Exchanging is an effective tax planning tool. Large potential tax liability can therefore be deferred. And, there are savvy investors who have deferred taxation on millions of dollars of properties for decades and thus given themselves many millions of dollars of additional investment money with which to leverage their wealth.

Like kind exchange can now be defined as: any kind of real estate in exchange for any other kind of real estate.

We hear of qualifying property or properties – yes there can be more than two properties involved, in some cases there can be several and you don’t have to ever see or even know about the other properties involved. You will need good advice however, professional advice. This exchange of any kind of real estate for any other kind of real estate was not always true. This tax deferment alternative is not for everyone. Some owners should not defer.

We must realize, as well, that there is ALWAYS a risk of audit. The larger the dollars involved and the more suspect (according to the IRS) that the participants in the transaction are, the more likely an IRS audit of the procedure is. If there are several million dollars in tax deferment involved, and especially if one or more of the participants are considered audit targets by the IRS for any reason, you may become involved in an expensive tax audit. The cost of the audit, even if you are successful in defending your decisions, can be far greater than the tax deferments. And if the deferment is disallowed there WILL be penalties, fines, interest and even more substantial legal and accounting fees – plus an amended return in some cases which may trigger more consequences and even more audits. I hope I’ve made myself quite plain here – get good advice from legal and accounting specialists on these exchanges.

There is a time line, for several of the acts and consequences in exchanges according to the IRS. In addition to timing there are other qualifying or disqualifying situations and these situations include the use of the properties, before, during and after the transaction by those involved or their families, friends, associates, etc… In addition to the normal criteria for the exchanges, if Realtors, investors, attorneys, or those who buy and sell real estate frequently are involved in exchanges; the IRS makes special, more restrictive rules that will result in more scrutiny by the IRS. In fact the IRS can make up reasons why they think a person needs more scrutiny; that can include political affiliations, relationships to politicians, your social position, your affiliation with judges, and conspicuously wealthy or well known people and even your religious affiliations and charitable giving recipients. In fact, there can be a tax deferred exchange that will work for one side of the exchange and not for the other person or entity involved.

In addition the tax court looks at intent for use, investment, or purchase and sale — not only the use; past, present and future; of the properties involved but what they think may be or could be the uses and consequences based on all sorts of criteria and even hunches they may have. They also have extensive rules on what like-kind exchanges are. The exchange must also be interdependent. There may not be any receipt or control of cash or other liquid assets from the sale by any of the exchangers. This can be inclusive of debt relief as well. Any of these things will be taxed. In fact, a refinancing of any property involved within two years or less will disallow the tax deferment as well. There are also several time limits and timing criteria involved which must be allowed for and honored.

There are some specific terms; relinquished property and replacement property are the most important terms; after the most important definitive phrase of all: Like Kind Property Exchange. Large potential tax liability can be deferred; that is: NO tax is due upon receipt of the proceeds; from your investment in qualifying real estate, whether buying or selling, can be maximized by deferring the tax liability, the consequences, and using the deferred expenses. That is; you are saving and have the use of the tax money you don’t have to pay now, and you can invest that money in the next property, giving you a multiplied ability to invest and reap further benefits of appreciation and income. Therefore, you will have the additional money, and therefore additional down payment, to invest in an even larger property or pay cash for a more expensive property. This can change your life; your life as an investor, your business life, at least.

The exchange does not have to be simultaneous. You must in general; identify the property within 45 days and settle within 180 days.

There are also delayed exchanges, non simultaneous exchanges, which are sometimes called Starker Exchanges. There can be a buyer assisted, delayed, Starker exchange. This buyer assisted, delayed exchange, is done with the help of the buyer – by letting the buyer possess or even live in the property for a while. This is almost always a bad idea, a very bad idea. There is also such a thing as a reverse-Starker exchange. In a Reverse Starker Exchange the replacement property is acquired before the relinquished property is sold. These are rare, unusual, possible and legal – but not to be considered lightly without adequate counsel involved in your every planning facet.

For the protection of all involved; the contracts, all exchange documents and paperwork should be prepared by specialists in tax deferred transactions. The Realtor should never, ever, prepare the exchange documents!

There are some additional factors and rules. You can name up to three possible properties in that first 45 day period. There is also a rule called the 200% aggregate rule where you can name several
properties up to but not more than 200% of the value of the relinquished property. Property held by a person who deals in property does not qualify. Personal residential use property does not qualify. Partnership interest in property does not qualify. Refinanced property will not likely qualify if it has been refinanced in the last two years. The property must ordinarily be held for investment and generally acquired and held for appreciation and for production of income such as rental income.

Let’s now look at the sale of personal residences. The gain on a personal residence has no tax due on the first $250,000 of gain for one person or $500,000 tax relief for a couple. A principle residence is one that a person resides in for 183 days per year or more and no other. Factors which determine a person’s principle residence are four; each showing the same residential address of that being claimed: A Driver’s License; Magazine, Newspaper, and Internet Subscriptions, Utility Bills such as Cable TV, Telephone, etc. that are mailed to and show the address as residence, credit card bills, checking and savings accounts, voter registration card, personal telephone listing in the white pages.

There are many pages of rules, regulations, code, determinations, tax code, rental and vacancy rules, abandonment according to prescription, determinations of intent, various capricious factors known only to particular IRS agents, time lines, divorce issues, temporary use, rental, vacancy, or abandonment issues, documented or discoverable intentions on the part of participants in the transactions, multiple dispositions in short periods of time, work related occupancy and vacancy requirements, personal business use of property, income streams, family uses, health related and documented residential move or vacancy requirements, court cases and other recorded facts, all manner of special requirements and issues, land installment contract provisions, miscellaneous extenuating and defensible contingencies – which will affect the bona fide legality and defensibility of a tax deferred transaction. There are many points upon which your planning should be based. There are some emergency planning techniques as well.

You can even take some improvement expenses and take a fix up expense for work done to sell the house. You MUST have: Written affirmation of necessary expenses that are needed to sell the property. Be able to prove the work was done within 90 days of the executed contract of sale. There is also, now, a maximum of 20% taxation on the taxable portion of the net gain on the home. Generally tax laws are applied separately to each individual owner or co-owner of the property and each must meet requirements separately and individually.

Take care. Be prepared. Educate yourself and ensure that your advisors are as well. Be legally and financially, well represented and very professionally and personally wary.


End Note: The above article was written in the form of notes during a class I attended on exchanges that was delivered by SEVERAL full time professionals in the business of ONLY these types of exchanges. These notes are to be considered guidance in the form of alarming you to the point of getting proper counsel only. You may know the exchanges of Real Estate as Starker Exchanges, 1031 or 10-31 exchanges or even as “tax free” exchanges. They are NOT tax free, they are tax deferred! Be careful.

Do not use the information in this article to make your final tax or selling or buying decisions. This information here is to give you enough data to begin thinking about deferred tax – exchange of real estate.

Do not make any decisions or write any documents based on this information. Get specialized legal advice from experts in this exact business; not from unspecialized attorneys or accountants – and especially NOT from general Realtors such as myself.

Ask to see the credentials of anyone who seeks to advise you, they will have them or not, exact and specific credentials, in writing, of their professional ability to serve you. If not, chose another professional to help you. In fact feel free to contact me and I’ll get you in touch with those senior professionals who are full time in this exact profession.

There are law changes frequently on these forms of transactions and as I write this 10-31-2001 there are several laws being discussed and perhaps voted on today that will change many of the factors involved here – hopefully for the best – in order to help bolster our economy even more and support the real estate business in which I work.

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Arrest Warrant Issued for Missing Real Estate Attorney

Missing Breckenridge Colorado real estate attorney Royal “Scoop” Daniel, age 61, is now a Wanted Man. Daniel was first reported missing from his Breckenridge office on April 27th, 2007. On May 8th, 2007 the Breckenridge Police Department obtained an arrest warrant on suspicion of Class 3 Felony Theft for Daniel in connection with his handling of his client’s 1031 Real Estate Exchange funds.

A 1031 Tax Deferred Real Estate Exchange occurs when a property owner sells investment real estate and uses the proceeds from the sale to purchase other investment real estate. In this case, the property owner does not pay capital gains tax on the sale of the relinquished property provided that the replacement property is of equal or greater value. Section 1031 of the Internal Revenue Code requires proceeds of the sale to be held by an intermediary third party until the replacement purchase is made.

It is alleged that Daniel, while serving as an Intermediary for 1031 real estate exchanges, used client’s funds to pay personal expenses and to fund the transactions of other 1031 real estate clients. One investigator described this as a situation of “robbing Peter to pay Paul” and that it caught up to Daniel to the tune of at least $500,000.

When Scoop was first reported missing on Friday April 27th, the belief throughout the Breckenridge community was virtually unanimous that he must have been the victim of wrong doing. Scoop has been a long time resident of Breckenridge and is beloved throughout the small mountain town. He was very active in a local church and did a great deal of volunteer work for a variety of local organizations.

These fears were amplified by information of a silent a nine second 911 call made from Scoop’s cell phone on the morning of his disappearance. Daniel also left his dog, car, keys, coat, and hat behind at his office.

That weekend over 150 volunteers, in conjunction with local authorities, conducted an extensive search of the area within a two mile radius of Daniel’s office and the nearby alpine trails. No evidence of any wrongdoing or Daniel’s whereabouts was found.

At the same time, Breckenridge Police investigated the possibility of Daniel’s willful disappearance. Police learned that Daniel had left a paycheck for his secretary on her desk on the morning he disappeared. He had never done this before.

Also that morning, Daniel gave a key for his residence to his girlfriend of five months. She found this odd because he never locked his door. Daniel also gave her some personal belongings which he said he would not need for awhile.

Investigations into Daniel’s finances indicated the he is in extreme debt and the he may have been illegally moving money into and out of his Colorado Lawyer Trust Account Foundation (COLTAF) client trust accounts, 1031 real estate escrow accounts, and his business and personal accounts to pay business expenses and personal debt.

On May 1st, 2007 a previous client of Daniel’s contacted the Breckenridge Police Department with information regarding a 1031 Real Estate Exchange transaction from a year earlier. The client stated that he had given Daniel over $250,000 in trust as part of the transaction and that when the time came to produce the money, Daniel could not do so, admitting to having used the money to pay other people’s 1031 monies and that he was $300,000 in debt. The client also stated that Daniel eventually paid him most of his $250,000.

Since the initiation of the missing person case on April 27th, 2007, the Breckenridge Police Department has been contacted by seven of Daniel’s clients indicating that Daniel was holding 1031 Real Estate Exchange funds on their behalf. Information provided by just four of these clients indicates that Daniel should be holding at least $561,571 of 1031 Real Estate Exchange funds in trust accounts. Less than half this amount has been discovered in all of Daniel’s various personal, business, and trust accounts. Breckenridge Police expect that records from the remaining three clients, as well as others yet to contact authorities, will widen the discrepancy in coming days.

Despite these recent findings, many members of the Breckenridge Colorado community continue to believe that Scoop would never have created such a situation of his own accord and that he is not a willing participant in it. This is a possibility which authorities have not ruled out.

Copyright 2007 – All rights reserved by Ted Amenta

Notice: Publishers are free to republish this article on an ezine or website provided the article is reprinted in its entirety including copyright and author information, and all links remain intact and active.

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Know Everything About the 1031 Real Estate Exchange

The 1031 Real Estate Exchange is a dynamic tool for real estate investors and helps to defer the capital gains tax for a long while.

The 1031 Real Estate Exchange is applicable when using the sale of income property to purchase another income property. The sale and purchase must be completed in a specified time period.

You, as the real estate investor can never have any control over the proceeds from the real estate sale. The money from the sale of the first property is placed in trust with an intermediary. This intermediary is supposed to collect and hold the money from the buyer of the first property and transfer it to the seller of property number two. In recent years, however, there have been problems with the intermediaries.

Some of the intermediaries have been disappearing with the money they were supposed to be transferring. Others often co-mingle clients money into one account. If there is a problem with a single transaction and those monies from that transaction are frozen, everyone else’s money in that account gets frozen along with it.

The transfer of the money from sale to purchase must take place within 180 days for the real estate investor to avoid capital gains tax. If the intermediary does not make the transfer on time, the real estate investor is assessed full capital gains on the sold property.

The 1031 Exchange is a great opportunity for real estate investors, and many more of them should be taking advantage of the tax break. There are, obvious drawbacks to tying your money up in a 1031 Real Estate Exchange, but you can address the risk potential.

To lessen the risk of your money getting stolen or frozen, you can insist that the intermediary deposit your funds in a single account, with no ties to the intermediary’s personal funds or any other exchange dealings. Then simply see that the account is labeled so as to have your (the investor) name, social security, or tax identification number tied to it with a provision that the money is for the person to act as your intermediary. You can do this without being considered in possession of the money or in violation of the exchange restrictions. All it takes is a trip to your bank with the intermediary to set it up.

Dealing with your bank, rather than one chosen by the intermediary, makes the holding of the money prior to transfer a less risky operation for you. Your bank knows you and will realize that this money is being held for you and will only be released by the intermediary to buy your income property.

By doing this, you are better guaranteed that the money will securely pass from the intermediary to the seller without any funny business.

When you sell your property the liability of capital gains is a big issue. There are some ways available to defer this liability. 1031 Real Estate Exchange is a very useful method. But you should use it very carefully. Chintamani Abhyankar discusses precautions while using this tool.

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1031 Real Estate Exchange And The Importance Of A Qualifying Intermediary

A 1031 real estate exchange can provide great benefit to your financial net worth and is one of the most important tools in a real state investors’ toolbox. This article will specifically focus upon the importance of choosing a very good qualifying intermediary and what factors you should consider when deciding which one to work with.

A qualifying intermediary is the most critical piece of the puzzle when looking at doing a 1031 real estate exchange. These are professional companies will ensure that you satisfy all of the IRS regulations regarding doing your exchange along with holding the money in escrow until you have found the properties which you will exchange. If certain guidelines are not properly followed, you can lose your ability to do a 1031 tax exchange and have to pay the financial consequences so be sure to do your due diligence.

Many of the same factors which you’ll probably look use when searching for a new business partner will come into play when choosing a qualifying intermediary. You want to first check on the track record of the qualifying intermediary. If a company has been around for about 10 years, that is a good sign. The IRS clarified its guidelines regarding 1031 real estate exchanges in 1991. If the company is over 10 years old that means it has seen the changes in the industry and has considerable experience. You also want to check on the background of a company and where it operates. If you’re looking for a property in Alabama and a qualifying intermediary you have spoken to has never done a 1031 tax exchange in Alabama, you’ll probably want to consider using a different qualifying intermediary. You want someone who has the experience and the track record. You also want to see what kind of support and help are available with this company. There are very tight guidelines regarding when you identify properties as well as when you buy these properties so you want to make sure that there’s enough help so that you will meet the guidelines. Also use a qualifying intermediary who uses strong security features and reasonable fees. Make sure to talk with several qualifying intermediaries to compare some these factors. Finally you should try to get a couple of references from the qualifying intermediary to make sure that they have done good work for other people in the past. If the company refuses, do not hire them.

A qualifying intermediary has a very important part within this picture and you must work to find the one to do business with. This may well be the most important decision you make throughout your work on a 1031 tax exchange.

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