1031 Exchange

Explanation

Just like traditional real estate, oil and gas mineral and royalty interests are considered like-kind replacement property for the purposes of a 1031 exchange. This means that investors have the option of investing all or a portion of the proceeds from a commercial real estate transaction into oil and gas minerals all while deferring capital gains taxes.

1031 Exchange Options/Types

Simultaneous or Concurrent 1031 Exchange Rules
When the relinquished property and the like-kind replacement property close (settle) at the same time in a Simultaneous 1031 Exchange or Concurrent 1031 Exchange.
Forward or Delayed 1031 Exchange Rules
You close on your relinquished property first and subsequently purchase (close on) your like-kind replacement property within the prescribed deadlines in a Forward or Delayed 1031 Exchange (also referred to as a “Starker” Exchange).
Reverse 1031 Exchange Rules
The like-kind replacement property is acquired and “parked” by the 1031 Exchange Qualified Intermediary (“QI”) first and the relinquished property is subsequently sold later within the prescribed 1031 Exchange deadlines in a Reverse 1031 Exchange.
Build-to-Suit (Improvement or Construction) 1031 Exchange Rules
Your 1031 Exchange proceeds from the sale of your relinquished property are used to acquire like-kind replacement property and some of the left over 1031 Exchange funds are used to improve the replacement property in a Build-To-Suit 1031 Exchange.
Personal Property 1031 Exchange Rules
Personal property (i.e. non-real estate) can also be exchanged for other personal property of like kind or like-class in a Personal Property 1031 Exchange.

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1031 Exchange Checklist

5 Key things you need to know about executing a 1031 Exchange

Net Selling Price ( NSP = selling price less closing costs)
In order to defer all of the capital gains on the property you are selling, you must purchase a replacement property, or group of properties, using an amount equal to your NSP. If you purchase replacement property for less than your NSP, you will owe capital gains tax on the difference.
Qualifying Properties/ Qualifying Replacement Properties
To qualify for a 1031-Exchange, the property you are looking to sell MUST be deeded and held for investment and/or business-purposes. Proceeds from the sale of the property can then be used to purchase deeded Replacement Property, which must be held for investment and/or business purposes.
Qualified Intermediary
Current tax regulations require that you use a Qualified Intermediary (QI) to facilitate your exchange. The QI will prepare the Exchange Agreement, escrow the proceeds, and coordinate the exchange with the closing agents.
45-Day Rule
From the date of the sale of your original property, you have 45 days to identify three (3) replacement properties
180-Day Rule
You have 180 days from the date of sale of your original property to close on any and all identified replacement properties.

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Heritage-Land-Minerals-1031-Exchange-Copy

Capital Gains Tax Deferral

As ‘like-kind property,’ oil and gas royalties are eligible for IRC-1031 Exchanges, which provides capital gains tax relief for real estate and energy investors.

Maximum capital Available to Invest

A 1031-Exchange maximizes the amount of capital available to invest, which helps not only maximize potential personal investment returns, but also helps promote the nation’s overall economic health.

Exposure to Non-Market correlated cash flow potential

A 1031-Exchange into minerals/royalties provides exposure to non-market correlated cash flow potential. Unlike commercial real estate that is driven by rents, royalty cash flow is generated from a well’s monthly production sales. Additional cash flow may be added as new wells are drilled on the acreage.

Asset appreciation potential

Mineral/royalty ownership in unconventional shale plays provides exposure to upside potential. As continued development “proves up” additional reserves, the market value of royalty interests has the potential to increase, resulting in a better overall ROI.

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Do you or your clients own any of the following real and personal property as an investment or for use in their business?

The following real and personal property are eligible for 1031 consideration:

Build on land already owned
Businesses
Farms
Shopping malls and strip centers
Golf courses and practice ranges
railer parks
Self storage facilities
Oil, gas and mineral interests
Water and ditch rights
Parking lots
Condominiums
Improvements/Build to Suit
Build on land already owned
Gold, silver and numismatic coins
Convenience stores
Land
Commercial buildings, warehouses
Gas stations
Apartments
Hotels and Motels
Leasing portfolios with cars, trucks and equipment
Hospital equipment
Artwork
Rental properties
Collectibles – rugs, antiques, cars, coins, stamps, metals, gems
Conservation easements
Timberland
Communication towers
Aircraft
Livestock

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“Heritage can communicate oil and gas fundamentals and investment strategies in simple every day terms. They helped me purchase some leases that were significantly less expensive and way more profitable than my friends offer. I would highly recommend Heritage Land and Minerals for their professional expertise and high ethical standards”

Harrold A. | Investor

“I’ve worked with Don and his team at Heritage Land & Minerals on over five mineral properties. I’ve continued investing with them and have enjoyed how easy and straight forward they have made the process.”

Richard A. | Investor

“I have purchased over 30,000 acres of minerals in my career – this is as painless as possible, return on some tremendous.”

Rickey S. | Investor

“I have been doing business with [Heritage] over one year and l also convinced my wife to invest with them. They are very clear and precise when they are communicating the information with you. I have already done two deals with them in the past year and l am about to do another one.”

Louis S. | Investing Partner

1031 Exchange

Explanation

1031 Exchange Options/Types

Simultaneous or Concurrent 1031 Exchange Rules

Forward or Delayed 1031 Exchange Rules

Reverse 1031 Exchange Rules

Build-to-Suit (Improvement or Construction) 1031 Exchange Rules

Personal Property 1031 Exchange Rules

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1031 Exchange Checklist

Net Selling Price ( NSP = selling price less closing costs)

Qualifying Properties/ Qualifying Replacement Properties

Qualified Intermediary

45-Day Rule

180-Day Rule

Capital Gains Tax Deferral

Maximum capital Available to Invest

Exposure to Non-Market correlated cash flow potential

Asset appreciation potential

Do you or your clients own any of the following real and personal property as an investment or for use in their business?

Contact us for more information

About Heritage Land & Minerals

Contact us to invest

Free investing prospectus

1031 Exchange

Explanation

1031 Exchange Options/Types

Receive Our Free Investing Prospectus

1031 Exchange Checklist

Capital Gains Tax Deferral

Maximum capital Available to Invest

Exposure to Non-Market correlated cash flow potential

Asset appreciation potential

Do you or your clients own any of the following real and personal property as an investment or for use in their business?

Contact us for more information

About Heritage Land & Minerals

Contact us to invest

Free investing prospectus

Receive Our Free
Investing Prospectus