Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
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have — at a minimum — an amount equal to the anticipated cash proceeds from the sale of the relinquished property plus any additional funds required to satisfy the replacement property purchase price and closing costs. In an exchange-last structure, if there is fi nancing, the lender must agree that title to the replacement property may be parked with the EAT, and that the loan is nonre- course to the EAT. Consequently, the tax- payer should obtain the lender's approval for the transaction as early as possible to avoid closing delays. Since the loan is non- recourse to the EAT, the lender will oſt en require that the taxpayer personally guar- antee the loan, which is permitted by IRS Rev. Proc. 2000-37. In an exchange-last structure, if the cash provided by the taxpayer for the EAT's pur- chase of the replacement property is less than the cash proceeds generated by the sale of the relinquished property and there was fi nanc- ing, the taxpayer may wish to have the EAT use those additional cash proceeds to pay down the loan in order to balance the equi- ties in the exchange. T is balancing of equi- ties must occur prior to the taxpayer's acqui- sition of title to the replacement property. Under these circumstances, the pay down should occur just prior to or concurrent with the EAT's transfer of the replacement prop- erty to the taxpayer. T e taxpayer should also negotiate with the lender in advance for a principal pay down without penalty. Environmental Issues. Regardless of any indemnities that the taxpayer may provide in the exchange documents, the EAT must be assured that it will have no liability for envi- ronmental issues with respect to the parked property. Consequently, for any parked property that is not residential property, the taxpayer should anticipate that the EAT will require a current Phase 1 ASTM Standard E-1527-05 environmental report certifi ed for its use in the transaction. Likewise, the tax- payer should allow suffi cient time before the closing to ascertain the EAT's requirements in this regard and for this report to be gener- ated and reviewed by the EAT. Taxes and Closing Costs. Since the property parked with the EAT is trans- ferred twice, the taxpayer must anticipate the added expense of double transfer taxes and closing costs. Few, if any, jurisdictions have exceptions to the double transfer taxes. Additionally, it should be noted that most states now have "transfer of controlling inter- est" statutes, which preclude the opportunity of avoiding transfer tax by transferring the membership interest in the LLC in lieu of conveying title by deed. Marna E. Mignone, JD, is vice president and corporate counsel for Old Republic Exchange Co., a qualifi ed intermediary. Contact her at mmignone@orexco1031.com or OREXCO Vice President Julie Tumbaga at jtumbaga@ orexco1031.com. 2011 President's Cup CCIM Chapters earned the President's Cup Award in a competition conducted by the CCIM Institute. The President's Cup Awards program is designed to objectively recognize and reward achievements and member programs by CCIM Chapters demonstrating the highest degree of skill, ingenuity, and innovation in promoting the Institute's membership benefits. The following chapters earned the 2011 President's Cup Award. The three tiers are based on annual gross revenue and number of members. The awards were presented at the Institute's Annual Spring Business Meetings held in Kansas City, Mo. TIER 1 Congratulations to the following CCIM Chapters: TIER 2 1st Place - North Carolina CCIM Chapter 2nd Place - Florida CCIM Chapter 3rd Place - Houston Gulf Coast CCIM Chapter 1st Place - Southern Nevada CCIM Chapter 2nd Place - Oregon/SW Washington CCIM Chapter 3rd Place - San Diego CCIM Chapter TIER 3 1st Place - Kansas CCIM Chapter 2nd Place - Southern Arizona CCIM Chapter 3rd Place - Memphis Metro CCIM Chapter CCIM.com May | June | 2012 15