March 26th, 2008

Using 1031 Exchanges

Posted in Investing, Real Estate, Taxes by admin

The indefinite capital gains deferral an exchange grants to the taxpayer may, at first, appear to be a gift given by the United States government, however it is, in reality, closer to an interest free loan, because the taxpayer is expected to “repay” the funds acquired by way of the deferral by accepting capital gains liability on the eventual sale of a replacement property. Additionally, this ”interest free loan” may be kept indefinitely; an investor can conduct any number of exchanges before finally making the decision to make an outright sale, on which taxpayer must pay taxes.

1031 exchanges are not limited to just land and buildings, either. You can make a 1031 exchange on any sort of real estate you are holding for investment in a business or trade, and certain kinds of personal property as well, from a backhoe or crane to an aircraft or collector car. In fact, 1031 exchanges are especially advantageous to those who have invested in collectibles or antiques like collector cars, because of the higher capital gains tax liability on the sale of these types of items. You cannot, however, make an exchange on things like shares of stock, bonds, or interest gained from a Real Estate Investment Trust.

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March 12th, 2008

Consider your 401K investing options

Posted in Finance, Financial, Taxes by admin

Making mistakes when it comes to 401k investing can cause a lot of problems in the future when it is time for you to retire. However there are som ehtings you can do to help avoid potential pitfalls when you are investing your 401K funds. Diversification can help spread the risk. As an example, mutual funds do allow a person to diversify their 401k investments but you should consider splitting your investments among several different mutual funds. If your company is offering their own stock for you to invest in don’t put all your funds into it. Certainly many people soon saw the pitfall relating to this one after the collapse of Enron and other such companies where they had their employees investing their 401k plan funds in the company. It would be smarter to limit your purchasing of any one company’s stock to a small percentage of your funds. Another consideration is making some portion of your investments in non-US companies. This can help protect you against weaknesses in the dollar that can decrease your returns.

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