Browse Tag: Delaware

Politician Cites 1031 Exchanges As…Divine Financial Advisory?

US Capitol Building

Ah, the political season.  The time when persons with sometimes monumentally odd ideas about cause and effect stand on a stump and broadcast these ideas loudly and clearly.

Well, loudly, anyway.

Meet Ben Carson.  A retired surgeon from Detroit, Carson’s political star is rising thanks to a strong showing in a recent straw poll. Riding the wave of recent notoriety brought him to a radio appearance, where an interviewer asked, in the context of Carson’s self-declared religious faith, if he had ever been “angry with God”.

Incredibly, his answer somehow included one of the real estate industry’s most venerable tax deferments and a favorite topic here at The Source: the IRS 1031 exchange.

The only other question I was given time to pose came […] when I asked Carson, who self-identifies as deeply religious, if he’s ever doubted or been angry with God.

Yes, indeed, he indicated, recounting an incident in which the Lord apparently subjected him to Job-like tortures over a problem involving residential real estate. After buying a new house, he just couldn’t unload the old one. “My house was on the market for five years. And I said, ‘I pay my tithes. I am faithful. I try to help people. So why is this happening to me?’ ” Carson told me.

“And [then] I found out about the ‘1031 Exchange’ [named for a tax code provision] where if you sell a piece of property and you make a very, very large profit on it, you don’t have to pay huge taxes on it if you can roll it over into another property of higher value.”

Carson’s story went on in this disjointed fashion, and didn’t seem particularly illuminating, except to suggest that it definitely wasn’t an ordinary crisis of faith and the Almighty must be a savvy adviser on the Internal Revenue Code.

So Where Did 1031 Exchanges Come From?

While it’s far from clear if Carson believes 1031 exchanges to be the work of a higher power than Congress, his answer provides food for thought. Given that I’ve written about 1031 so many times, I thought I might contribute some clarity on the point.

1031 exchanges first appeared as part of the Revenue Act of 1921, passed as a package of federal tax reductions by a Republican-majority Congress on November 23 of that year. Lauded by Treasury Secretary Andrew Mellon, the Act repealed a tax on wartime excess profits, reduced the top marginal rate on individuals from 73 to 58 percent and instituted a new and more easily avoided corporate tax.

Specifically for Dr. Carson’s benefit: everything Congress votes on is in the public record.  And a quick look at that 1921 Senate vote (found here) lists many luminaries, including  future President William McKinley (voted aye), Wisconsin firebrand Bob LaFollette (nay), and Delaware’s quasi-aristocratic Thomas du Pont (no vote).

The almighty, however, is not listed in the roll call.

(Photo credit: ttarasiuk)

Delaware Enacts Commercial Brokers’ Lien Law

governor ceremonial bill signing one okay (Large)

In April, the Delaware legislature passed the “Commercial Real Estate Brokers’ Lien Act.” Pictured behind Governor Jack Markell are the Delware REALTOR® team at the bill signing ceremony this week.  The Act is a victory for commercial brokers and managers, putting into law the right to recover unpaid compensation for managing, selling or purchasing commercial real estate. Well done, First State!

The “Lien Act” or the “Brokers’ Lien Act” applies to real estate “ Brokers” who hold a broker license from the Delaware Real Estate Commission with respect to the sale or rental of real estate in the State of Delaware. The Act applies to Brokerage “Agreements,” which means any written agreement for the payment for brokerage services of a broker for the management, sale, purchase, lease or other conveyance or acquisition of commercial real estate. Commercial real estate does not include single family residential units such as residential condominiums, townhomes and mobile homes.

The Act provides the broker with the right to place a lien upon commercial real estate that is the subject of a brokerage agreement for the unpaid amount of compensation due the broker as stated in the brokerage agreement, provided that the brokerage agreement expressly states the following:

  1. The amount or the method of calculating the amount of compensation for the services of the broker; and
  2. That the brokerage agreement is a binding contract under state law; and
  3. The identity of the real estate that is covered by the brokerage agreement by description and/or tax parcel number.

Section 26.04 of the Act provides that the brokers’ lien shall attach to the commercial real estate upon the broker filing an Affidavit and Notice of Brokers’ Lien in the form required by the office of the Recorder of Deeds in the county where the commercial real estate is located. The broker must then, within 10 days, cause a copy to be served upon the person or entity charged by certified mail, return receipt requested or process server. The Affidavit and Notice of Brokers’ Lien may only be filed by an attorney admitted to the Bar of the Supreme Court of the State of Delaware.



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