Its a big city out there Joe (V V)

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Posted by Bill Gatten on October 24, 2001 at 14:30:40:

In Reply to: It's Joe Friday . . . posted by William Bronchick on October 23, 2001 at 18:19:14:

Bill,

I've run out of gas on this one, Bill, and will again defer to you to end the snowball throwing. Though our feelings remain tentative on the issue, all of our documentation re. property with a sale price over basis will henceforth contain a reference to your verbiage (in general).

Note first that VERY few NRB's have ever had concerns about depreciation or 1031's. Coming out of a co-beneficiary land trust wouldn't work for a 1031 anyway unless one were going into another co-beneficiary land trust with identical or greater debt and equity: though coming IN to a land trust ownership from other commercial real estate ownership is quite feasible, assuming the co-beneficiary interest were to be established later on..

Questions that haunt us on the issue (but I give up, I give up) are: When I own a 50% interest in the land trust in which my income property is vested, what happens in the event of a default by the resident beneficiary after the property has increased in value...i.e., what is my adjusted gross basis if the property had already been sold once and is now mine again? What if the resident dies and the property comes back: i.e., what about reversionary tax penalties (they would undoubtedly kick in if there had been a sale and then a subsequent re-acquisition...but this is a land trust…’without’ reversionary penalties).

Think too of this: The non-resident beneficiary says to the IRS: "What? I didn't know those turkeys were taking the tax write-off too. I never meant to sell anything to them." Then the resident comes back and says: "What? Wait just a durn minute here: the pertinent IRS Code says that I qualify for, and have every right to, the active tax write-off by virtue of my contractual obligations and actions in a qualified residence." The Non-resident then says: "Yeah, and even though I took the active write off, it was neutralized by my rental income and I never got nuthin’ for it anyway: so why shouldn’t them other nice folks take it?"

Just some of the points we ponder.

Bill Gatten

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