What Do I Tell Him?
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Here’s a challenge for all of you in the S.E.C. brain trust. Read the question below and send me your answers. A summary of your responses will be published in the next issue.
I recently received the following inquiry from a broker friend of mine. He was concerned about two things. First, was the transaction described below going to meet tax code requirements for a tax-deferred exchange? He was also concerned about losing a large commission because of a recommendation from the client’s CPA.
Here’s the question. “My client has just told me that I should stop looking for a $2,000,000 replacement property for him because his CPA is now recommending that he purchase a tenant-in-common interest in an offering for a large apartment complex. The CPA says that it is a way for my client to eliminate management responsibilities and it’s an easy solution to the timing problem of finding the replacement property. If he does not exchange, he will report about $500,000 in gain. I’m close to finding an acceptable property and we still have 35 days remaining in the identification period. Is a tenant-in-common project right for him, and if not, what do I tell him to convince him that he should continue to look for his replacement property?”
I found out that the client is in his mid-50’s and has owned a number of income properties and has had great success with all of them. He hires professional property management and has been satisfied with their services. The client plans to continue to build his estate though real estate investments. The client knows nothing about tenant-in-common projects.
What do you tell him? I look forward to your answers.
