1031 Exchange Information - Starker 1031 Exchange
A brand new money market account is opened for each exchange - and YOU get the monthly bank statement from Union Bank of California.
At Haven Exchange, we create transparency for 1031 exchange funds by opening a brand new money market account for each exchange. At 98% of qualified intermediaries nationwide, according to the FEA, your funds are pooled with other people's exchange funds, where they might be invested in something with higher returns that never reach your account, lost if such investments are reduced in value, stolen or lost to debtors in a court judgment. At Haven Exchange you receive the monthly bank statement from the depository bank, removing all doubt about the liquidity, security and growth proceeds pertaining to your 1031 exchange funds.
That's what makes Haven Exchange the best. See what our customers have to say.
Here's some background about 1031 Exchange:
In the beginning, an exchange was completed simultaneously; that is, the property being sold and the property being acquired were transferred at the exact same time. People swapping properties with each other, and swapping equity. Because the taxpayer ends up in approximately the same financial position, and the value retained is investment real property, the IRS concedes that there is no gain upon which to be taxed.
That is still true. But it is now far more common that the replacement property is not acquired simultaneously, and almost never from the buyer of the relinquished property.
Starker was the first case in which a delayed exchange was approved by the court. At first, the IRS disallowed the exchanges because the IRS believed that 1031 exchanges could only qualify if all real estate involved were transferred at the exact same moment in time. The IRS said there could be no passage of time between the transfer of the relinquished property and replacement property in an exchange. The Starkers paid their taxes and filed suits in the U.S. District Court in Portland, Oregon.
Three court cases ensued:
Preceding the case known as Starker I- 1975, the IRS first filed a deficiency notice against Bruce and Elizabeth Starker. The Starkers paid the tax and sued for a refund. In a very short opinion, the court decided in favor of Bruce and Elizabeth Starker without making mention of the fact that the exchanges were not simultaneous.
In 1977, the government filed suit against T.J. Starker (T.J. Starker v. U.S., 431 F. Supp. 864 D. C. Ore. 1977). This time the court, the same one that ruled in Starker I, found that there was no exchange and that a taxable sale had taken place. This case reversed the first decision. Judge Solomon wrote he was mistaken in Starker I and stated, “My opinion in Starker I has been given wide publicity. I believe that it is desirable that my opinion in this case be published to prevent the mischief that I believe Starker I has caused.” He further wrote that T.J. Starker had exchanged real property for a promise that was not like-kind under the statute. He ruled that the growth factor was taxable as interest.
The third and final case was T.J. Starker’s appeal (T.J. Starker v. U.S., 602 F. 2d 1341 9th Cir. 1979). The Ninth Circuit Court ruled that the government was collaterally stopped by Starker I from re-litigating nine of the transfers overturned in Starker II. Most importantly for real estate investors, the Court could not find any requirement for simultaneity in the 1031 tax code. The court ruled in favor of Starker.
Voila! The delayed exchange!
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