Your Guide to the 1031 Exchange

US National 1031 Exchangewww.USNational1031.com

877-671-1031

Questions877 - 671- 1031

Introduction

US National 1031 Exchange has a long history of providingQualified Intermediary Services. Since 1979 we have beenassisting investors to achieve their goals and build wealth.US National 1031 Exchange is part of Title Resource Group,a Realogy company.

US National 1031 Exchange has accomplished thousands of tax deferred exchange transactions in its 30 year history. Whether yourtransaction is a multi-million dollar office complex or single family rentalunit, we are here to provide you with highest level of experience andsecurity of funds.

This booklet is designed to give you a brief overview of the benefitsand mechanics of a 1031 Exchange. The subject matter is vast and sometimes complex. We invite you to call our toll free number so we can better understand your individual situation.

What is a 1031 Exchange

Internal Revenue Code,Title 26, Section 1031 is the statute dealing with the deferment of capital gainstax on the sale of real property, and in some instancespersonal property.

“No gain or loss shall be recognized on the exchange of propertyheld for productive use in a trade or business or for investment,if such property is exchanged soley for property of a like-kind whichis to be held either for productive use in trade or business or investment”

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The Power of an Exchange

For every dollar of tax deferred your buying power is increased four times.

Many investors and real estate professionals have confusion overthe like - kind requirement and what it means.

Like - kind means exchanging an investment property for investmentproperty. For example, raw land for a strip mall or an apartment building

The like - kind requirements create flexibility for the investor to diversifytheir holdings, reating an opportunity to expand and grow your

Top Reasons to Exchange

Increase Cash FlowTrade In Fully Depreciated PropertyProperty RelocationConsolidationExpansion

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or five single family rental homes.

wealth.c

US National 1031 Advantage

StabilityFinancial stability - We are part of the Realogy family of companies.Our adherence to the strictest accounting and financial methodologies is a precept of how we do business

ProtectionWe are properly bonded and insured to provide full circle protectionfor your clients funds

FocusExchanges are what we do, this is our only profession.We are not distracted by other businesses that could inhibit your transaction

ExpertiseOur exchange professionals are here to guide you through the transaction whether commercial or residential , they will coordinateand expedite your requests with accuracy and diligence.We haveroutinely handled rush exchanges or last minute exchangesat settlement

HistoryOur foundations were built in real estate and as such our focus is to cater to the real estate investor and professional.We have beenoperating since 1979 and have a full staff of experts available tohandle your exchange needs

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Capital Gains Calculation

Capital Gains is NOT equity. In fact it is possible to have a capital gain with no equity in a property. Upon your decision to sell any investment property it is paramount to speak with your tax advisor. Your taxadvisor will determine your exact tax liability for the property(s) in question.

Capital Gain Calculation

ADJUSTED COST BASIS

Original Purchase Price

plus Improvements

minus Depreciation

= Adjusted Cost Basis

$240,000

$15,000

$30,000

$225,000

Sales Price

minus Net Adjusted Basis

minus Cost of Sale

= Capital Gain

$400,000

$225,000

$28,000

$147,000

CAPITAL GAIN

Recaptured Depreciation (25%)

Federal Capital Gain (15%)s

State Capital Gain

= Total Tax Due

$7,500

$17,550

$13,671

CAPITAL GAIN TAX

$38,721

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Sell Example

Sales Price

minus Cost of Sale

minus Loan Balances

= Gross Equity

minus Capital Gain Tax

Net Equity

$400,000

$28,000

$147,000

$225,000

Exchange or Sell

Using the example from the previous page will demonstrate the power of deferring capital gain taxes.

$38,721

$108,279

With $108,279 available for downpayment your estimated purchasing power for a new property is $433,000. This is assuming a 25% downpayment on the new mortgage. If you employed the services of US National 1031 Exchange your purchasing power would have been $588,000 assuming you deferred your taxes and put down 25% on the new mortgage.

Exchange Example

Sales Price

minus Cost of Sale

minus Loan Balances

= Gross Equity

minus Capital Gain Tax

Net Equity

$400,000

$28,000

$147,000

$225,000

$0

$147,000

Now ask yourself this question? Assuming your real estate investment keeps up with inflation and appreciates at 3% per year which property would you rather have owned? The property worth $433,000 or the property worth $588,000. Over a 5 year period appreciating at 3% the difference in value between an exchange saleand tax sale is $174,000. This is how wealth is created. 5

Exchange Mechanics

The IRS has established specific timelines and identificationrequirements needed to complete a 1031 Exchange.

Total Transaction Time - 180 days to purchase your replacement property(s) after you have closed on your relinquished property.

Identification Period - The first 45 days of your 180 day transaction timeline is called the Identification Period. After you close on your relinquished property you have 45 days to idenitfy potential replacement property(s). The IRS has three requirements to identify potential replacement property(s).

Identification Requirements

Three Property Rule - The Exchanger may identify three (3) properties of any value

200% Rule - The Exchanger may identify any number of properties if the total fair market value of what is identified does not exceed 200% of the sale price of the relinquished property; or

95% Rule - If the Exchanger identifies more properties than are permitted under the two rules above, the Exchanger must acquire 95% of what was identified.

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180 Days

45 Days

Step One

Always contact your CPA, tax and/or legal advisor to discussyour individual tax liability.

1. You may contact US National 1031 Exchange for a freeconsultation at any time. You should have your Qualified

Intermediary in place and discussions with your tax advisor prior to selling your property.

2. To open an exchange you may contact us at 877-671-1031 or you may visit our website www.USNational1031.com and open your

exchange on-line.

You will need the following information:

a. Name and contact information b. Real estate agent’s name and contact information c. Subject property address d. Contact information of your title/settlement, attorney or escrow company.

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Our Parent Company: Title Resource Group

Title Resource Group, a Realogy company, is a driving force in the title and settlement services industry.

At TRG, we are national in scope, but locally staffed, with awealth of experience in settlement services. TRG provides residential, commercial and timeshare title insurance, closing management services, real estate closing services and private labeled closing services for lender’s.

Member Federation of Exchange Accommodators

Fidelity Bonded and Insured

Certified Exchange Specialists on Staff

Visit www.USNational1031.com

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