[WSBARP] 1031 Exchange and Like Kind Property

Tue Apr 21 11:20:58 PDT 2015

I want to thank everyone who weighed in on the 1031 timber questions.  I
have re-read all of the string of emails and consider myself well educated
by those of you with the depth of experience needed.  

It was interesting and fun.  You are all good connections.

Thanks,

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

From: wsbarp-bounces at lists.wsbarppt.com
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Tom J. Westbrook
Sent: Tuesday, April 21, 2015 11:15 AM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] 1031 Exchange and Like Kind Property

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 <mailto:tjw at buddbaylaw.com> 

Skype: thomas.westbrook

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

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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 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 <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 John Teutsch
Sent: Monday, April 20, 2015 7:23 PM
To: WSBA Real Property Listserv
Cc: Lloyd McGee; Mary Foster (mfoster at 1031services.com
<mailto: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.

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Campbell, Dille, Barnett & Smith,  PLLC

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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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