Investing in 1031 Exchanges

Investing in 1031 Exchanges Grows

BY STEVE DINNEN

1031 Tax Deferred Exchange Programs, a popular and often-used real estate investment tool, ran into a serious scare last year when President Joe Biden proposed stripping them of much of their tax benefits. He had intended for resulting income to be used to help fund the American Families Plan.

But according to a study supported by accounting firm Ernst & Young, eliminating
1031 exchanges would negatively affect the economy by up to $13.1 billion annually. One analysis found that a repeal of 1031 exchanges would likely result in less federal tax revenue.

So the changes were scuttled, the threat went away, and now, says Ken Tharp (pictured), 1031s are alive and well. “I am very, very busy” assembling exchanges, said Tharp, founder and owner of Iowa Equity Exchange, in West Des Moines. His firm serves as a mandatory intermediary when a 1031 exchange occurs.

Estimates are that as much as 20% of all commercial real estate transactions in the nation fall under the 1031 exchange designation. Sometimes they are used for big deals – former first son-in-law Jared Kushner was reportedly keen on them as he and his firm traded apartment and office buildings in New York and Chicago. But a local strip mall in Wichita, or Des Moines, is just as likely a target of a 1031 exchange.

The beauty of the 1031 exchange is its deferred tax component. If, for example, you sell one property and earn a profit on it, you can stall off any taxes as long as you reinvest the money back into a like property. Taxes could be avoided altogether if you die and the property goes to a qualifying heir. Congress has clamped down on some abuses, and nowadays 1031s are almost exclusively applied to real estate transactions (though they began in 1921 as a way for farmers to swap livestock tax-free).

A way newer take on these real estate-driven tax breaks is those made in Opportunity Zones, created in 2017. But their applicability is limited to investments made in designated geographic areas.

Tharp, at Iowa Equity, said a good economy has fostered solid performance for 1031 exchanges. The tax scare was just that, while the COVID scare was transitory.

“The pandemic really didn’t slow things down much,” he said. “March and April of 2020 were just a [hiccup].”

Consider Masking Your Credit Card When Buying Online

BY STEVE DINNEN

You may not be a master of disguise, but your credit card can be. And maybe it should be, since the world of online commerce is replete with tales of credit card numbers getting hijacked for no end of illegal purposes.

Among credit card issuers, most, but not all, of cards issued by Capital One and Citi carry a feature that allows numbers to be masked when making online purchases. This also applies to mobile wallets from Apple, Google and Samsung, according to Kiplinger’s Personal Finance.

The process is slightly cumbersome to set up, but relatively easy to maintain. At least that’s the case with Capital One: Cardholders download and install a browser extension called Eno. When they reach the checkout page on a merchant’s website, the browser extension pops up, you sign into your card account, and a merchant-specific card number is generated.

Mobile wallet users have a slight advantage, say Kiplinger’s, because they can create virtual credit card numbers that can be used both online and in a store. When you go this route, make sure to keep a record of your purchase because there will not be any credit card statement to back you up.

What to Know About 2022's High-Risk Investing Trends

BY MARTHA C. WRIGHT FOR MONEY.COM

For every investor profiting off a business poised to become the Next Big Thing, there are countless others getting burned by SquidGame digital tokens, fake Elon Musk Twitter accounts or another wannabe high-flyer that either implodes or turns out to be a scam.

Some of the most popular investment opportunities around exist in the worlds of cryptocurrency and decentralized finance. But creators have run into a major stumbling block on the path to profitability: When pretty much anyone can pitch in on building new digital infrastructure, there’s a good chance that some of those participants will inadvertently (or deliberately) mess things up.

As we head into 2022, here are the high-risk investing trends that people will be talking about nonstop, and what you need to know about each of them. READ MORE

Older Women Face More Financial Hardship Than Men

BY PAULA SPAN FOR THE NEW YORK TIMES

A recent AARP survey found that almost 30% of women over age 65 reported feeling very or somewhat worried about their current financial situations (compared with 20% of men that age).

Despite gains in education, employment and earnings in recent decades, American women still face a rockier road to secure retirement than men. Yet they live longer and are more apt to encounter illness, disability and the eventual need for expensive long-term care. It’s a troubling picture.

“Women are considerably more likely to experience poverty in retirement than men,” said Richard Johnson, an economist at the Urban Institute in Washington, D.C. In 2020, according to Johnson’s analysis, 10% of women over 65 lived in poverty, compared with 8% of men, with far higher rates for women who were older, of color or unmarried. The poverty rate for unmarried Black women over 65, for instance, topped 20%. READ MORE