[WSBARP] 1031 Exchange and Like Kind Property

[Jim Doran]

Well, it looks like we are all getting an education here.

 

I'm not sure if the language is confusing things.  There is a contract to
purchase the trees.  That contract exists while the trees are still
standing.  The trees get cut and hauled to the mill and the mill pays for
the amount of timber (and species that shows up.

 

"Cutting rights"?  We are not selling the "cutting rights".  We are selling
the trees and we won't cut them until we have a sale of the trees but not
the land.  We would like to take the receipts from the sale of the trees and
reinvest the money into an investment property, real estate.

 

This is getting muddier by the moment.  

 

James R. Doran

Attorney at Law

100 E. Pine Street - Suite 205

Bellingham, WA 98225

(360)393-9506

 <mailto:jim at doranlegal.com> jim at doranlegal.com

www.doranlegal.com

 

From: wsbarp-bounces at lists.wsbarppt.com
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of John Teutsch
Sent: Monday, April 20, 2015 7:23 PM
To: WSBA Real Property Listserv
Cc: Lloyd McGee; Mary Foster (mfoster at 1031services.com)
Subject: Re: [WSBARP] 1031 Exchange and Like Kind Property

 

I sent this question to Mary Foster, who authored the treatise, Tax-Free
Exchanges.  Her answer follows:

 

Cutting rights are not like-kind to a fee interest in real estate if they
are limited in duration or quantity.  Perhaps, a perpetual right to cut
timber would possibly be considered like-kind to real estate.   The IRS
position, supported by case law, is that cutting rights are personal
property.  See Oregon Lumber Co. v. Comm. of Revenue.    This is true even
if cutting rights are considered real property under Washington state law,
because federal tax law governs.  See IRS Tech. Advice memo 9525002.

 

 

 

John Teutsch

Teutsch Partners, LLC

Cell (206) 920-8888

 

From: wsbarp-bounces at lists.wsbarppt.com
<mailto:wsbarp-bounces at lists.wsbarppt.com>
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Jim Doran
Sent: Monday, April 20, 2015 6:43 PM
To: 'WSBA Real Property Listserv'
Cc: Lloyd McGee
Subject: Re: [WSBARP] 1031 Exchange and Like Kind Property

 

Ok.  The timber gets cut under a contract to buy it, so I guess that means
it is sold as real estate, right.  

 

Who do you use as the 1031 faciltator?

 

James R. Doran

Attorney at Law

100 E. Pine Street - Suite 205

Bellingham, WA 98225

(360)393-9506

jim at doranlegal.com <mailto:jim at doranlegal.com> 

www.doranlegal.com <http://www.doranlegal.com> 

 

From: wsbarp-bounces at lists.wsbarppt.com
<mailto:wsbarp-bounces at lists.wsbarppt.com>
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Bryce Dille
Sent: Monday, April 20, 2015 5:21 PM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] 1031 Exchange and Like Kind Property

 

The sale of standing timber is considered as real estate see WAC 458-61A-113
since it is subject to the real estate excise tax. I have done several of
these types of 1031s  and never questioned as long as timber is still in the
ground when sold.

 

This transmission contains confidential attorney-client communications and
may not be disclosed to any person but the intended recipient(s).  If this
matter is transmitted to you in error, please notify the sender immediately.

 

Bryce H. Dille 

Campbell, Dille, Barnett & Smith,  PLLC

P.O. Box 488

Puyallup, WA  98371

Voice:  253.848.3513

Fax: 253.845.4941

 <mailto:bryced at cdb-law.com> bryced at cdb-law.com

 

Business Entity Creation and Management

Business, Government and Tax Law

Real Estate and Land Use, Residential, Commercial and Condominium
Development

Real Estate and Commercial Transactions & Closings, Including Performing
Services as IRS Section 1031 Exchange Facilitator

Estate Planning, including Wills and Trusts, and Probate Administration

Representation Homeowners/Condominium Association Real Estate Developments

Real Property Foreclosures and Forfeitures

 

From: wsbarp-bounces at lists.wsbarppt.com
<mailto:wsbarp-bounces at lists.wsbarppt.com>
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Jim Doran
Sent: Monday, April 20, 2015 4:10 PM
To: 'WSBA Real Property Listserv'
Subject: [WSBARP] 1031 Exchange and Like Kind Property

 

Here is the line from the IRS information website that I think clearly
denies the use of a 1031 Exchange to a the situation where the owner of real
property with timber on it sells the timber and then wants to use the
proceeds from the timber sale to buy more real estate.  The trees are
personal property, are they not?

 

"Real property and personal property can both qualify as exchange properties
under Section 1031; but real property can never be like-kind to personal
property."   

 

James R. Doran

Attorney at Law

100 E. Pine Street - Suite 205

Bellingham, WA 98225

(360)393-9506

jim at doranlegal.com <mailto:jim at doranlegal.com> 

www.doranlegal.com <http://www.doranlegal.com> 

 

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