CoStar.com is reporting:
In a real estate alert to its clients, the law firm of DLA Piper in Atlanta, GA, wrote, “For taxpayers who have exchange funds at LandAmerica 1031 Exchange, the automatic stay imposed by the Bankruptcy Court in connection with the Chapter 11 filing will require Court approval of the release of any funds.”
“Accordingly, it is highly unlikely that those funds will be immediately available, and they may not be available in time for the scheduled exchange closings, if any.”
Another Blow to Faltering 1031 Real Estate Industry – CoStar Group.
CoStar reports that there are 450 exchange customers with transactions pending.
It is likely that some of these exchanges may fall out of contract because those in the “upleg” of their transaction will not be able to purchase the property.
If the bankruptcy court does not move quickly to free the funds, some of the exchanges may incur tax consequences if they do not close within the IRS mandated time frame. This could be a terrible mess for commercial real estate investors.
Tags: 1031 Exchange, Credit CrisisRelated Posts
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Peter Maclennan
Commercial Mortgage Lender for Owens Financial Group a California based hard money portfolio lender.
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December 5th, 2008 at 7:06 pm
…not only will your 1031 exchange “fall out,” you’ll more than likely:
get whacked your 15% capital gains taxes, on a deal which didn’t close, on money you never were allowed to touch, and possibly won’t get…
and..pity the poor devils who signed construction contracts, subs, suppliers, etc. on a 1031 “build to suit” as replacement property!
suppliers and contractors are now threatening LandAm 1031 customers, whose funds are locked up, with separate suits for non-performance!
what a flipping mess!
I have a LandAm 1031 deal in this mess….