[WSBARP] 1031 Exchange and Like Kind Property

Tue Apr 21 11:15:15 PDT 2015

Jim,

The mill is paying for logs in the scenario you have below. So that
means the timber is cut, the logs are removed, scaled and a price paid
either per ton, per thousand board feet or cubic feet (depending upon
the mill and type of logs delivered). That is not the same as buying
standing timber. If you are getting paid based upon a delivered product
to the mill, I believe you are selling logs which is personal property
and would not allow for a 1031 for other real estate investment. The
devil is in the details here. As an aside, within the timber industry,
selling or buying cutting rights is not the same as selling or buying
standing timber. I only know this having spent the first 20 years of my
adult life buying timber and operating my family's sawmill business;
dealing with 1031 exchanges regularly. Having said that, I am not a
facilitator and am not offering tax advice - just timber industry
opinion. Good luck.

Sincerely,

Tom

Thomas J. Westbrook

Attorney at Law

Rodgers, Kee & Card

324 West Bay Drive NW, Suite 201

Olympia, Washington  98502

Phone: 360-352-8311

Facsimile: 360-352-8501

Email: tjw at buddbaylaw.com

Skype: thomas.westbrook

www.buddbaylaw.com

The information contained in this email and attachment(s) are for the
exclusive use of the addressee(s) and may contain private, privileged
and/or confidential information.  If you are not the addressee, you are
strictly prohibited from reading, photocopying, distributing or
otherwise using this email or its contents in any way. If you have
received this communication in error, please notify us immediately by
telephone at 360-352-8311 or by e-mail to reception at buddbaylaw.com
<mailto:reception at buddbaylaw.com> , and destroy the original message
from your electronic files.

From: wsbarp-bounces at lists.wsbarppt.com
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Jim Doran
Sent: Monday, April 20, 2015 11:13 PM
To: 'WSBA Real Property Listserv'
Subject: Re: [WSBARP] 1031 Exchange and Like Kind Property

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

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] 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

www.doranlegal.com

From: 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

bryced at cdb-law.com <mailto: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] 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

www.doranlegal.com

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbarp/attachments/20150421/0ea8d8ad/attachment.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image001.jpg
Type: image/jpeg
Size: 3629 bytes
Desc: image001.jpg
URL: <http://mailman.fsr.com/pipermail/wsbarp/attachments/20150421/0ea8d8ad/image001.jpg>