The Voice - FEA Newsletter June MESSAGE FROM OUR PRESIDENT Bill Horan, CES. Dear FEA Members: FEA STAFF

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1 The Voice - FEA Newsletter June 2014 FEA STAFF Executive Director Lynn Harkin, CAE Certified Association Executive FEA 1255 SW Prairie Trail Pkwy. Ankeny, IA (515) Office (515) Direct (515) Fax director@1031.org FEA BOARD OF DIRECTORS President William Horan, CES Realty Exchange Corporation bill@1031.us Past President & Ethics Committee Chair David Brown, CES Iowa Property Exchange dbrown@ipe1031.org President-Elect & Conference Planning Committee Co-Chair MESSAGE FROM OUR PRESIDENT Bill Horan, CES Dear FEA Members: Capitol Hill (again) As detailed in the GAC Tax Report, several of us made another trip to Washington. As we suspected there is a lot of misinformation about We came away from the visit with the following three specific tasks: 1) 1031 Tax Reform Resource FEA has launched The purpose of this site is to provide a central place for anyone with an interest to get specifics about the repeal proposals, industry responses, and current 1031 tax reform developments and to provide tools for anyone to communicate with their individual representatives. This site is also where we will provide material you can use to spread your own message. 2) 1031 Economic Study From our visits and communications with other interested groups, it is clear the industry needs to provide hard economic numbers to show the impact of a repeal of We need economic evidence to counter the $40.9 billion 10 year JCT revenue scoring estimate that was created for the Ways & Means Committee. At the moment all we have is anecdotal 1

2 Mary Cunningham, CES Chicago Deferred Exchange Company Treasurer Steve Chacon, CES Accruit, LLC Secretary & Conference Planning Committee Co-Chair Margo McDonnell, CES 1031 CORP. Directors Brent Abrahm, Government Affairs Committee Co-Chair Accruit, LLC Suzanne Goldstein Baker, CES Investment Property Exchange Services Tim Halligan, CES Membership Committee Chair Exchange Authority Max Hansen, CES Government Affairs Committee Co-Chair American Equity Exchange Michael Hines, Affiliates Committee Chair The Bancorp Bank Teresa Person, CES 1031 Exchange Corporation Ex-Officio/ CES Liaison Kelly Pearl, CES California Bank & Trust and survey information economic impact numbers do not exist. We have launched an effort to engage a prominent tax group to help us do an economic study so we can provide industry researched information on the repeal impact. We have already begun the effort to engage other industry groups who have a vested interest to help with this effort. 3) Continuing Grass Roots As the election nears we have a key opportunity to weigh in with members to tell them 1031 is great tax policy and a repeal would have unintended consequences. We have engaged Lucas Ecklund Baker to help us with this effort. He is helping us create tools we need for our grassroots efforts and track the impact we are having. Many of you may have already heard from Lucas, and you can expect to hear from him more and more as we crank up our grass roots messaging. New FEA Website, FEA is proud to officially announce the launch of our new website. This is a fully integrated interactive membership website. Please take a few minutes to take a tour for yourself, and be sure to give us feedback on your experience so we can make any changes that will make the site better. The effort to convert from the old site to this new site was huge. I want to thank everyone who worked on this project. Annual Conference The annual conference is fast approaching, and registration is open on the new website ( The conference is packed with up to date information and is in a wonderful location! Great job Conference Committee team! Keep Prospective Member Names Coming As the market continues to pick up speed, we'll begin to see more QI's jump into the business. Each and every one should be a member of the FEA. If they are not a member, they are not plugged in. Please continue to pass us the QI's you see who are not members so we can reach out to them to join. Enjoy your summer! Bill Horan, FEA President FEA PAC Update 2

3 A small group of Government Affairs Committee members with Dave Franasiak and Tess Illos from Williams & Jensen visited Capitol Hill on May 8 and 9. That group, comprised of Suzanne Goldstein Baker, Mary Foster, Derrick Tharpe, Bill Horan, Brent Abrahm and Max Hansen, concentrated on key members of the House Ways & Means Committee and the Senate Finance Committee and other off committee members of Congress who are in important Congressional leadership positions in both parties. AFFILIATES FIRST FEA members are encouraged to support our Affiliate members. Over two days the group met with more than 30 key Congress people and their staffers, updating them on the importance of 1031 to the economy, outlining the flaws in the current Congressional and Administration proposals to repeal or limit 1031 and confirming their support for the 1031 industry. The Hill meetings were taking place at the same time as the ABA Tax Section May Meeting, and members of the FEA GAC Committee who are also members of the Tax Section's Sales, Exchanges and Basis Committee met with IRS staff to discuss various 1031 issues. It was refreshing to hear at least one key IRS staffer state in that meeting that repeal of 1031 is "a bad idea." A subgroup of the FEA GAC is scheduled to attend another round of DC Hill meetings the third week in July. In conjunction with Williams & Jensen, the Committee plans to reconvene the 1031 Coalition group we assembled in March followed by targeted Hill visits. Our strategy continues to be to keep the cause of 1031 retention first and foremost on Congressional radar screens and encourage critical analysis of the current repeal proposals. The FEA has launched a targeted website: to collect all information about the FEA's efforts to preserve Make sure you, your friends and clients use it. FEA PAC Update For those of you who have given to the FEA PAC, we can't thank you enough. These dollars are CRITICAL to our efforts to influence key decision makers. We are still short of our goal. All of our businesses and livelihoods will be dramatically impacted by repeal or limitation of Section If you have not responded to the PAC requests, it's your time to step up. We need each of you and your employees to participate. Everyone needs to bear their fair share of the load. 3

4 You can contribute to the PAC by credit card the process is very simple and takes only a few minutes. If you haven't already, you will be hearing from both Naomi Weitzel and Brent Abrahm. Please respond to them and add your dollars to our efforts to influence key legislators. The election is coming, legislators are listening and our targeted PAC donations help us be heard. EARN YOUR CES DESIGNATION 45 and 180 Day Extensions for Disaster Areas in Florida, Alabama, Arkansas and Mississippi In April and May, 2014, the IRS issued extensions for disaster areas in counties in these states, and these extensions apply to Section 1031 time periods. See: Learn More Relief in Disaster Situations for further details. Frank J. Blangiardo v. Commissioner; T.C. Memo ; No The IRS filed a motion for partial summary judgment on March 12, 2014 for a deficiency of $1,366,993 in petitioner's 2008 Federal income tax and an accuracyrelated penalty of $273, The taxpayer owned a $2,250,000 property that he held through two divorces. In each case, he settled his ex spouse's' claims against him for payments of $500,000 and $80,000 respectively. At issue was whether those payments increased the basis in his property and whether the property's subsequent delayed exchange for unimproved land qualified for tax deferral under Section

5 The Court granted the IRS's motion for partial summary judgment. Regarding the exchange, the Court held it to be invalid due to the fact the QI was the taxpayer's son (who also was an attorney). Since a son is a disqualified person under Treasury Regs (k)(3), the exchange was easily denied. The Court did not examine whether the exchange would have qualified outside of the QI safe harbor. As for the basis increase, the Court stated there is no basis increase when a taxpayer receives a spouse's interest in property pursuant to a divorce, regardless of whether it was for consideration paid. The rules regarding transfers pursuant to divorce are found under IRC SAVE THE DATE FOR THE FEA 2014 ANNUAL CONFERENCE The Union Station Nashville, TN September 10-12, 2014 Are you the FEA Key Contact for 5

6 your Member Company? As we head into the election season the FEA PAC is a vital part of our strategy to influence Congress to keep 1031 exchanges. For those of you who have contributed: THANK YOU! The FEA PAC is limited to our members. The key contact for a member company must give FEA permission to solicit. We must have this permission form completed before you can participate by contributing to the PAC and help save If you have not given FEA permission, please take a moment to complete and return the FEA 1031 PAC Permission to Solicit form. Even if you are the only employee of the company, we need your completed form in order to provide information on the FEA 1031 PAC. Only individuals can give to the FEA PAC - not companies. We have made the process to contribute simple & quick. Every dollar counts. Recognizing Kelly Kipping for 20 Years of Service This month Kelly Kipping, FEA Member Services Manager, celebrates 20 years of service with Association Management, Ltd. (AML). AML has been FEA's management firm since Thank you Kelly for your dedicated service to AML and FEA, and for your contributions to the association management profession. 6