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Posted on Tue, 12/6/2011 - 06:21 PM by
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Hotel owners can adjust their portfolios by replacing underperforming assets through the use of a 1031 improvement exchange-strategy. According to the Internal Revenue Code Section 1.1031, 1031 exchange allows no gain to be recognized when property held for investment or business use is exchanged for like-kind property held for investment or business use. With the 1031 improvement exchange, hotel owners sell an existing hotel to acquire a hotel, renovating the new property with newly-acquired property such as like-kind furniture and equipment in the old property while deferring the capital gains and recaptured depreciation tax. Multiple Asset ExchangeA hotel exchange is an example of a multiple asset exchange, which includes both real and personal property. Each group needs to be reviewed to determine the recognized gain or tax due for the real estate, furniture, equipment and other personal property. If the intent is to replace with like-kind or like-class personal property, then your Certified Public Accountant will categorize the personal property within the appropriate General Asset Class or North American Industry Classification Code. The settlement statement will reflect the exchange of real property, personal and possible, intangible property including a franchise fee. Improvement ExchangeIn an improvement exchange, proceeds from the sale of the old property go towards purchasing the new property and improving it. There are two types of exchanges, forward and reverse exchange. A forward exchange is when the old property is closed before the new property is acquired. A reverse exchange occurs when the new property is purchased before the old property is sold. Both follow the same 1031 exchange rules including:
Rehabbing can be accomplished with either a forward or reverse. The risk with a reverse is that the old property does not sell or not all the improvements are completed within the 180 calendar days. The key to both is that the improvements are ready to begin upon access to the replacement property. An Exchange Accommodator Titleholder (EAT) is on title for the duration of the exchange and makes payments to contractors with funds provided by the taxpayer. Procedures are in place for invoices to be approved by the taxpayer before the EAT rights a check. Personal property is purchased and is delivered for installation. If not all improvements are completed on the 180th calendar day, a percentage complete is determined and applied to the percentage of gain deferred. Ownership of the refurbished property is conveyed to the taxpayer. Planning is critical to meet the 180 calendar day deadline and maximize 1031 exchange benefits. MORE NEWS FROM BLUEMAUMAUGoing Green Costs Franchisees Much GreenBeing forced to buy imaginary products is just one of the nonsensical results of government policy affecting franchisors and franchisees. Good News, U.S. Hotel Profit RecoveryAccording to the new PKF Trends survey, the U.S. lodging industry produced a 12.7% profit growth in 2011. 80.5% of participating hotels enjoyed an increase in total revenue while 72.3% achieved growth in profits. The recently released 2012 edition of Trends presents data from a sample of nearly 7000 financial statements of United States hotels. For the Trends report, hotel profits are defined as net operating income (NOI) before deductions for capital reserves, rent, interest, income taxes, depreciation and amortization. Federal Court Invalidates "Quickie" Union Election Rule, For NowOn May 14, 2012, the U.S. District Court for the District of Columbia set aside a controversial final rule of the National Labor Relations Board ("NLRB") that was designed to make it easier and faster for unions to hold organizing elections. Chamber of Commerce of the United States of America, et al. v. NLRB, Case No. 11-02262 (D.D.C. May 14, 2012). Business groups are hailing the decision, but the celebration may be short lived. Because the ruling was essentially decided on a procedural point, the NLRB may seek to resurrect the rule, which creates a very short window for union elections, and leaves employers with little time to react to an organized union campaign. Field Representatives Coach Franchisees to Victory
A good coach will make his players see what they can be rather than what they are. "Live For Now" Stars Dead IconPepsiCo announced aggressive marketing plans, boosting ad spending by 20% and bringing back deceased pop icon Michael Jackson as part of a worldwide campaign. RELATED SMALL BUSINESS NEWSHot Franchise Topic: Getting a LoanIt seems like the entire franchise industry is focused on funding, and with good reason; franchise loans are still a bit challenging to secure. Production Agreements of a Supply Chain; The Other End of the RainbowMany years ago I was pulled away from my usual assignments to do a major product production tolling agreement between two of America’s larger food companies. It was a stroke of luck for me because it provided something new for my interest in multivariate risks management. Since then I have prepared many multivariate high risk agreements, and it is always an enjoyable as well as remunerative adventure. When you think of every brand as a franchise in itself, it fits perfectly into my customary practice of managing franchise relationship disconnect issues. Know the Benefits of Application Protection in Any OrganizationIt is very important to ensure proper method of data availability on time. In that case, replication needs to be adopted in order to manage current backup information and system settings so that it can deliver fast restoration of data after any kind of disaster. As we know that it is not possible to avoid any kind of natural disaster or human error; but it is always mandatory to take proper measures for application protection, so that users do not face any kind of problem related to data loss. And, data replication is found to be the only way to remove or minimize the time lapse experienced in these situations. Pepsi Wants a New GenerationEverything the light touches this year is rapper Nicki Minaj’s kingdom. From the Billboard Top 100 to the Super Bowl half-time show, and her reign is about to expand to a major role in a new ad campaign for Pepsi. A Business Plan Should be a Requirement for Buying a FranchiseVisit any website that offers advice on starting a new business or expanding an existing one and you’ll find articles and advice on the importance of writing a business plan. There are tips ranging from how to write an effective business plan to the reasons why it’s so important. |
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