S.E.C. Real Estate Observer

Thank you for the warm welcome that Kim Englert and I received at the recent S.E.C. marketing meeting in Tulsa, OK. Kim and I look forward to working with each of you on your next 1031 exchange transaction, and to serving as your technical support team and sounding board for 1031 exchange related matters.

Exeter 1031 Exchange Services, LLC invests a significant amount of human and financial resources to keep abreast of new developments in the 1031 exchange industry, and in turn will communicate any important issues to you that may impact your 1031 exchange strategies. Here is what’s new.

Partnership Issues

Partnerships have always complicated 1031 exchange transactions. Partners often want to go separate ways and dissolve the partnership upon the sale of real property held by the partnership, which in turn creates last minute structural problems for 1031 exchange strategies.

The most common strategies to work around this problem include:

• ‘drop and swap’ where the partnership drops (transfers) the relinquished property out of the partnership and into the individual partners’ names so that the individual partners can complete a 1031 exchange transaction after holding the property for a sufficient period of time; or,
• ’swap and drop’ where the 1031 exchange transaction is completed at the partnership level and then the partnership drops (transfers) the replacement property out of the partnership and into the individual partners’ names after the partnership has held the property for a sufficient period of time.

The holding period is the problem. Advisors have historically recommended a minimum holding period of 12 months before property is dropped as described above. However, to further complicate the problem, the IRS has amended Form 1065 (Partnership Tax Return) for 2008 and now specifically asks whether there was any property contributed into the partnership or dropped out of the partnership during the last two tax years (question nos. 13 and 14 on page 3).

Therefore, a minimum holding period of two tax years is now recommended in order to successfully and safely complete a ’swap and drop’ or ‘drop and swap’ 1031 exchange strategy.

However, two new Private Letter Rulings recently issued by the IRS may provide some assistance with this issue. Private Letter Rulings PLR 200909008 and PLR 200807005 essentially allow the acquisition of 100% of the outstanding partnership interests to qualify as the acquisition of like-kind property. While Private Letter Rulings can only be relied upon by the taxpayer that requested them, they do provide some insight into how the IRS would view or treat similar transactions.

Please call me directly at (619) 615-4210 or on my mobile phone at (619) 602-9148 if you would like to discuss any of these issues in greater detail.

Kim and I look forward to seeing you at the next S.E.C. meeting in Louisville, KY.

William L. Exeter

President and Chief Executive Officer

William L. Exeter is the President and Chief Executive Officer for Exeter 1031 Exchange Services, LLC and Exeter Fiduciary Services, LLC and their affiliate companies. Mr. Exeter is based in the company’s national corporate headquarters in San Diego, California.

Mr. Exeter has been in the financial services industry since 1980 and entered the 1031 exchange services industry in 1986. He has written and lectured extensively on 1031 exchange transactions pursuant to Section 1031 of the Internal Revenue Code and on Tenant-In-Common (TIC) Properties as like-kind replacement property solutions pursuant to IRS Revenue Procedure 2002-22.
In addition, Mr. Exeter is the owner and host of The Exeter Group Real Estate Talk Radio Show™, is a frequent guest expert on “The Financial Advisors — Money Talk Radio Show” on San Diego News Radio AM 600 KOGO and on the “Inside Business Radio Show” on Business Talk Radio AM 1000 KCEO San Diego.

Mr. Exeter also serves as an industry consultant through Exeter Consulting Group, LLC and as an expert witness on 1031 exchange related litigation.

Immediately prior to founding The Exeter Group of Companies he served as President and Chief Executive Officer of TransUnion Exchange Corporation (formerly Diversified Exchange Corporation) in San Diego, California for four years and prior to that as Executive Vice President and Chief Operating Officer of The Chicago Trust Company of California and its 1031 exchange subsidiary for 13 years that were part of the Chicago Title Family of Companies.

In addition, he served as a senior executive with two 1031 exchange companies in the 1980s during the 1031 exchange industry’s infancy, and is one of the founding members of the Federation of Exchange Accommodators. He has administered in excess of 75,000 1031 exchange transactions during his career.

Mr. Exeter’s professional experience includes 1031 exchange, title insurance and escrow services, fiduciary, trust and retirement account administration and services, trust operations, investment management services, commercial banking, and insurance administration.

Mr. Exeter is involved with numerous professional organizations including the Tenant-In-Common Industry Association (TICA), COREnet Global, AIR Commercial Real Estate, ICSC, the San Diego Chapters of CCIM and CREW, NAIOP, SIOR, California Escrow Association, San Diego County Escrow Association, and NorCal Escrow Association, and is one of the founding members of The Center for Wealth & Legacy Studies™.

Mr. Exeter graduated from California State University, Los Angeles with a Bachelors of Science degree in Accounting, and from the Canon Financial Institute, attaining the Certified Securities Operations Professional (CSOP) designation. He is currently working toward his Certified Commercial Investment Member (CCIM) designation.

Kim Englert, MBA

Business Development Officer
Los Angeles and Orange County Branch Office

Kim Englert is a Business Development Officer for Exeter 1031 Exchange Services, LLC, and its affiliated companies, and is based in our Los Angeles and Orange County Branch Office located in Irvine, California. She has day-to-day management responsibility for business development, educational program delivery, and client relationship management for the Orange and Los Angeles County region.

Prior to joining Exeter 1031 Exchange Services, LLC Kim was a Paralegal and Executive Assistant for over five years to the General Counsel of TransUnion Title and Escrow of California (formerly Diversified Title and Escrow Services Company). She also held positions as a Data Imaging Specialist and Customer Service Representative with the Huntington Beach Fire Department for over three years and as an Assistant to the Office Manager for the law firm of Fogel, Feldman, Ostrov, Ringler & Klevens, ALC for over three years.
She is involved with numerous professional organizations including, AIR Commercial Real Estate, ICSC, CCIM and CREW, NAIOP, SIOR, California Escrow Association, Orange County Escrow Association, San Gabriel Valley Escrow Association, American Association of Women Accountants (ASWA), and the Federation of Exchange Accommodators.

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