Webinar Replay: 1031 Exchange Best Practices

On September 8, AltsDb co-founder Jimmy Atkinson hosted Justin Amos, national sales manager and 1031 specialist for JTC Americas, to present a live one-hour webinar for financial advisors. The webinar detailed best practices for real estate investors who are completing a 1031 exchange.

This podcast includes an audio version of the webinar, including a short introduction by Andy Hagans.

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Episode Highlights

Eligibility requirements for a 1031 exchange.
How a 1031 transaction can be used as a powerful tax planning tool.
The timeline and process for completing a 1031 exchange.
Commonly encountered issues with timing, and finding deals.
The various types of 1031 exchanges, including forward exchanges and reverse exchanges.

Featured On This Episode

Today’s Guest: Justin Amos, JTC Americas

About The Alternative Investment Podcast

The Alternative Investment Podcast is a leading voice in the alternatives industry, covering private equity, venture capital, and real estate. Host Andy Hagans interviews asset managers, family offices, and industry thought leaders, as they discuss the most effective strategies to grow generational wealth.

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Show Transcript

Jimmy: Welcome to today’s “AltsDB Webinar” Best Practices To Complete A 1031 Exchange. I’m Jimmy Atkinson, co-founder at AltsDB. Today’s webinar is sponsored by JTC Americas and our presenter today is Justin Amos 1031 specialist at JTC Americas.

And Justin comes to us today from San Jose, California. Justin, welcome to you, and we’re going to get to you and your presentation momentarily. Well, with that said, Justin, let’s talk 1031 exchanges, and JTC Americas you guys provide great services for the 1031 exchange industry. If you’re ready with your presentation, please take it away.

Justin: Thank you, Jimmy, again for having and AltsDB hosting JTC Americas and our 1031 Exchange education here today. Make sure I can click through. So a brief overview, just a quick agenda of what we’re going to be covering today. I’ll do a brief overview of JTC Americas. We’ll get into the basics of 1031 exchanges. We’ll go over the five steps to a successful exchange.

Considerations for why you should do a 1031 exchange and how the transaction is facilitated. The different types of exchanges. And don’t worry, as Jimmy mentioned, we won’t be rounding out with a test we’ll be actually rounding out this presentation with Q&A. So looking forward to those questions as they come up during our presentation. So a brief overview JTC Americas.

JTC Americas was founded on this principle that certain investment programs while well-intentioned, like 1031 exchanges lack the regulations or compliance guidelines and, therefore, have failed to achieve its potential by falling victim to either fraud or mismanagement. So using our Silicon Valley background, we developed a purpose-built technological platform to help reduce fraud and abuse, streamline the administrative requirements of these specialty types of transactions like 1031 exchanges, and ultimately help them do the good they are intended to do.

So for fund managers or investors, this means providing solutions that advance security, transparency, and regulatory compliance for each step of the investment lifecycle. Through our 17-plus years of leadership, we defined industry best practices in each of the markets we serve. From 1031 exchanges servicing, you know, to 125 billion as a QI to EB-5 investments and the 650 plus projects and 20 billion in capital flowing through our platform.

And today, we continue to make great strides in both the private equity space and most recently, the opportunity zone program where we have over 120 funds driving capital to the underdeveloped communities. So two years ago, JTC Americas then formally NES Financial was acquired by a firm out of the Channel Islands called JTC Group. JTC is an award-winning provider of fund corporate and private client services, was founded in 1987.

And the company employs over 1300 people across its 23 global offices and is a trusted administrator for assets over 200 billion. The company has recorded 34 consecutive years of revenue and profit growth and is listed on the London Stock Exchange. JTC Americas is the coming together of two fund powerhouses, two award-winning customer-driven platforms with high cultural values, high caliber employees, and unmatched fund administration expertise.

We both champion best practices leveraging technology for transparency, ultimately, so we can leave a positive mark on the communities we service worldwide. And now let’s get into the reason why you’re here today to discuss a little bit about 1031 exchanges. So for those of you who aren’t familiar with the 1031 exchange transaction, what is a 1031 exchange?

So simply put, it’s a method of deferring capital gains tax on the sale of a property held for business or investment use. No personal property or there may be a restriction on vacation homes. Throughout this presentation, you’ll hear me say business or investment use. And that’s a key factor when looking to enter into a 1031 exchange transaction as it can’t be used for a personal property.

Now, there are some different variations such as maybe living in a unit of a multifamily complex, or a hotel, or living in a duplex where those could be put into a 1031 exchange. But for most cases, the property needs to be held for business or investment use. Another thing to note here as well is that no gain or loss is recognized in a 1031 exchange. A 1031 exchange is deferring those gains that you’ve realized from this taxable event until a later notice.

And that later notice would be maybe at a change of titling or selling of that property down the line. So what cannot be exchanged? So stocks and bonds, close to action. So as recently as the 2017 with The Tax Cuts and Jobs Act personal property was eliminated to being 1031 exchange qualifiable.

So on this note property held for primary sale, so you can’t use properties that are flipped is a good point to note here as well. Securities, certificates of trust, or beneficial interest. Now, there are some interest in trust which is known as a DST, which you can learn a little bit more with AltsDB they cover a great subject on that subject matter. But those are the only ones that would be qualifiable for a 1031 exchange.

Interest in a partnership we’ll go over that a little bit later on how that can be 1031 exchange usable, but not directly from an interest in a partnership. So ultimately, who can benefit from a 1031 exchange? Now, any U.S. paying taxpayer whether it be an individual, a partnership, a corporation, an LLC, a REIT can all benefit from using a 1031 exchange.

Now, recently the statistics are approved from EY and the FDA, most of the people who do benefit from a 1031 exchange are those individuals. But we do see large corporations using this tax-deferral tool that’s been in practice for well, now over 100 years. Was first started in 1921 so now in 2022, people are still leveraging the benefits of using a 1031 exchange.

You can even actually do a 1031 exchange with foreign property and we’ll go over a little bit how you can facilitate that later in the presentation. So why do a 1031 exchange? Well, for one, it’s a method of deferring those capital gains taxes that would have been assessed at the time of the sale of the real estate asset. It’s an interest-free loan from the government.

You’re taking those proceeds that you’re making from the sale and transferring them over into a property or properties to complete the exchange. Tax amounts nowadays can exceed somewhere 20 to 30, and even greater 35% 37%. And depending on people’s financial situation at the time that could be breaking the bank. And ultimately would maybe want to defer those until a later point maybe with a change of government who’s leading in the presidency, so they can change the capital gains rate.

So things definitely come into factor. But most importantly, always be consulting your CPA or financial professionals to discuss why you should enter a 1031 exchange. Make sure you have a good team around you whether it be your real estate attorney, your CPA, and almost obviously the qualified intermediary our role that’s integral to complete the transaction itself.

Those tax savings in the next slide will show a visual breakdown of what the difference of those taxes can be. And so taking those proceeds into a new transaction so higher purchasing power for buying a new property. We’ll go over that in the next slide as well. You can use it to diversify so going from maybe one asset to multiple assets or maybe you have a portfolio and you’re combining all those into one large asset.

So definitely many reasons for why to do a 1031 exchange. Like I said most importantly, just be consulting your respective advisors before moving forward with the transaction as this is a taxable event. So as promised here is the visual representation of someone who decided to take the proceeds out or just take the cash from the transaction, maybe they were looking to purchase a property.

And one of the most things that we come across as a qualified intermediary and with our clients, is they weren’t educated or they didn’t know that this was available out to them. And that’s the most common answer that we hear from a lot of our clients is that, you know, they’re very happy that they were able to learn about this powerful tool, and then actually save themselves some taxes.

So the view on the left, use the property from a sale, they have paid the taxes of about 875,000 . So at the end of it, minus probably some closing costs are taking about $1.6 million to the table. Versus someone who put their money into the exchange they had zero basis and they’re deferring those taxes, now they’re bringing $2.5 million.

Now, I don’t know about you and the differences of that 1.6 versus $2.5 million could be a difference of someone purchasing their ultimate dream investment, the ability to purchase multiple properties that they were looking to do. So that’s definitely, you know, whether you’re a real estate agent, a CPA, or real estate attorney, and you’re advising your clients, this is definitely something that you want to bring up.

At least bring to their attention whether they want to move forward with it or not, you know, that’s ultimately their decision, but at least give them the decision ultimately to have this in their disposal. So what are the five steps to a successful exchange? So first and foremost, old and new properties are held for business or investment use.

As promised early in the presentation, you’re going to hear me say that a lot. The property must be held for business or investment use property it cannot be used with personal property. Again, there are some variations as I highlighted with like a duplex, or maybe it’s a living unit of one of the multifamily complexes. In those cases, the CPA would carve out those sections as a personal property. So those proceeds would not be put into the exchange and the remainder could be.

But for most cases or people who are facilitating this transaction are holding this property for business or investment use. One of the most common misconceptions when it comes to a 1031 exchange is that you have to match…you hear the term like-kind exchange and people think, you know if I’m selling a condo that I have to then purchase a condo.

As long as it’s real estate or real estate and again, the property was held for business or investment use, it’ll qualify. So which means you could sell a… as an example here on the slide someone purchased vacant land maybe they were looking to develop on it. And, you know, have held it for a couple of years, the land has appreciated, especially now. The last few years, we’ve seen real estate appreciation across all our asset class types to an astronomical amount.

They sell and now instead of having to develop anymore, they purchase a few single-family homes, and they completed their 1031 exchange. Holding period, that’s another common question that we receive, you know, as a qualified intermediary and I’m sure you as a CPA and real estate attorney. Now, there is no direct line in the sand for how long someone should hold a real estate property unless again, it’s a vacation home which we’ll go over on the next slide.

One of the examples that I use with clients is this, you know, let’s say they’ve purchased a property, you know, six months ago, again, with the intent of holding it for business or investment use. They rented it out for, you know, six months so they show a track record that it was being held for investment.

And then someone knocks on their door and, you know, provides them with a godfather offer, you know, something that they can’t simply turn down. Now the IRS is not going to say that you can’t do a 1031 exchange because you didn’t hold it for a certain period of time. Again, they looked at what’s called the intent of the property at the time of the purchase. So in this point, again they show a track record of intent, holding it for business use property, and then they can put that property to exchange and move on forward.

And then two year holding period is imposed if there’s related party. Related party comes into the terms of whether it was for a family, maybe a cousin or a direct lineage to you or a direct arm’s length to you for the property. And then again, if this is the situation you selling a property the person selling or buying then has to also do a 1031 exchange as well if it is a related party.

So for vacation homes, as promised, the property has to be held for at least 24 months period prior to disposing a 1031 exchange for two years. You’ve had to hold that property as a vacation home or an investment before you are disposing it into a 1031 exchange.

Now for each of those 12 months period a property must be rented out at the fair market value for at least 14 days to a non-related party. I just covered in the previous slide related party can’t be family members. So it has to be completely someone third-party to you could be a friend, technically. So as long as it’s not directly family members and rented at a fair market value. So you can’t cut them a discount, unfortunately.

And then most importantly, here a thing to note which is oftentimes a reason why people decide not to do a vacation home with a 1031 exchange because maybe they want to occupy it a little bit longer than those 14 days that is highlighted here on the slide or 10% of the time that it’s rented out for the year.

People will sometimes want to use it for, you know, monthly rentals or months at a time maybe in the summer or winter depending on, you know, where the asset is held throughout the United States. So often that time is what breaks down from moving into a vacation home. The IRS would deem that as a primary residence at that time. So when you had bought the investment or did a 1031 exchange you complete the transaction that would then convert from an investment to a primary residence and those capital gains that you did defer with the transaction would become due.

And again consult before making any decisions. As such, consult your CPA so that you know what tax that you would be due at that time. So number two, what is a successful exchange? It’s determining that is like-kind. As we discussed on the previous slide like-kind means that as long as is real estate to real estate and again held for business or investment use it’ll qualify within a 1031 exchange.

Another requirement is to determine that it is like-kind, the replacement property must be equal to or greater than the relinquished property. So that means the value of the property must be…if let’s say, for example, the client had sold a property for 500,000, the replacement property must be equal to in value of 500000 or more to complete the 1031 exchange.

Again, as promised, with the domestic to domestic or foreign to foreign, which means if the property was sold here and anywhere in the United States or any of the 50 states, you can then reinvest those proceeds to any into the United States. If a property was held overseas, then you, unfortunately, cannot bring those proceeds back here into the states, but you can reinvest anywhere else in the world to complete a 1031 exchange.

Some QIs…you know, sometimes it is a little bit complicated to facilitate that transaction since it is a U.S. tax code, some countries aren’t familiar with the processes to facilitate a 1031 exchange. So it’s definitely important to be working with a qualified intermediary who’s knowledgeable and has the capabilities to ensure that the transaction goes smoothly.

The replacement property must be identified within the 45 calendar days or the identification period. We’ll go over a little bit more later in the presentation what those rules and the timelines. 180 days is the full timeline from a 1031 exchange that the ticking time clock starts at the time proceeds have been transferred, the sale, the transaction has started and funds have then hit the third party escrow account established by the qualified intermediary.

There are no extensions from this timeline people ask that all the time. What if I didn’t identify within the 45 days or what happens if I can’t complete a purchase within 180 days? Unfortunately, there are no extensions to be done unless there are, you know, a presidential declared disaster.

So in 2020, I think there was a few hurricanes that had happened. And then those cases, the IRS comes out and has a ruling stating that they are an extension of the both 45 and 180 days, so that way, people can complete the transaction. Or maybe the exchanger can no longer physically purchase the asset itself as it has burned down or something extreme as that which is why most importantly, to have backups in your identification in case those things do happen.

And again, we’ll cover that a little bit later in the presentation. So, number three for the steps of a successful exchange, it has to be viewed as an exchange. The process cannot be just considered as an exchange rather than a sale and a purchase. So in the picture that we described earlier the sale and an exchange, the person who took the proceeds at the time of the closing, which I can’t stress it enough, it’s important to get the qualified intermediary our role as JTC Americas involved as early as possible when there are transactions.

So maybe when you are thinking about listing or definitely at least when you have a contract executed that way, the qualified intermediary can get the third party escrow account set up and have all the parameters and be communicating with all the parties involved. So that way, at the time of closing, the funds are wired directly to that account, rather than the person’s bank account. If for some reason those funds are the client does have constructive received the exchange or has constructive receipt of those proceeds, that will be considered a failed exchange and they can no longer proceed forward with the 1031 exchange.

So I can’t stress that enough. Definitely, be having this conversation earlier from a tax planning standpoint, but also, from a 1031 exchange point it can be the difference of having to pay hundreds and thousands in taxes. And we don’t want to have that happen. These are some of the ways that JTC as our qualified intermediary what we provide as a safe harbor to our clients.

As I mentioned, the integral role to complete a 1031 exchange is the qualified intermediary, the middle place between the selling of the property and the ultimate purchase of the replacement property or properties to complete the transaction. Now, another level we add into our security for our clients is the escrow agents which restricts the taxpayer from how to control those funds throughout the exchange.

Now, every qualified intermediary should have that in place again, but there are no regulations that are defined what are industry best practices for completing the transaction itself. Now, a few queries on what’s viewed as an exchange. One of the things I’d like to cover here is what if the taxpayer wants to take cash because that is a pretty common question that we do receive from our clients and exchangers.

That is something that can be done. So throughout this presentation what you’ll see on the slide deck and what you’ll hear from me in speaking is what the assumption of the goal is to fully defer those capital gains. That is the ultimate goal of a 1031 exchange transaction. But in a case where maybe clients want to take some cash out at the time of closing, maybe they want to pay off some debts or they want to have some extra savings instead of putting all into an exchange.

Just know that it can be done and it’s what’s considered a partial exchange, and just only those portion of those proceeds left out of the transaction would be taxed at the respectable rate. And again, always consult with your tax advisor to understand what that tax hit would be. So taxpayer continuity, so another common question that we receive…and this is what we’ll discuss when it comes to the interest in an LLC or interest in a partnership for why those it cannot move forward.

So taxpayer continuity means that the title holder does not matter, but the taxpayer. So the ultimate taxpayer for the entity whether it be an LLC, an individual, REITs, a corporation will be the ultimate exchanger in the transaction. And most importantly, that person doing the selling has to be the same entity doing the buying. So in the case of a partnership, for example, if the LLC is the ultimate taxpayer, it has to be the same entity doing the purchasing.

So it’s very common and we see this a lot. Single member limited liability company so single member LLC is used as a pass-through entity, for a liability or from the ultimate individual. But ultimately, it’s a pass-through entity so the individual itself would be the exchanger in the case to complete the transaction.

And another example of a disregarded entity is beneficial interest in a land trust. And step five, so the last and maybe one the most important to completing your 1031 exchange. As I covered earlier on the like-kind portion is that the fair market value of the replacement property must be equal to or greater in value of the relinquished property.

Again, that example of 500,000 was sold as the selling contract must be then equated into one or multiple properties to complete the exchange. As highlighted previously, all net proceeds this is with the assumption that the goal is to fully defer the capital gains must be put into the third party escrow account set up by the qualified intermediary and used to acquire the replacement property or properties to complete the transaction.

Now, it’s not just the proceeds that needs to be met if there’s any debt associated with the transaction as well must be carried over, or outside money must be put into the exchange. So again, using that example of 500,000 now, let’s say there’s 200,000 of debt on the property. So 300,000 minus closing cost, an exchange administration fees to be put into that third party escrow account.

Now, it’s a common thing that people think, oh, I only have to reinvest that 300,000. The IRS, unfortunately, doesn’t want you to come out on top so there will have to be new debt carried over into that property. You can always take on some more debt so whether it’s you’re taking on the exact 200,000 amount, or 300,000 if you’re looking to leverage up into a higher and better property that will qualify and meet the expectation of completing the 1031 exchange.

Again, I just covered whether you can over mortgage for a replacement property. So this is again a quick query on how that can happen. So if you did have 300,000, again, that threshold was 500,000 you needed to meet in the replacement property or properties. You take out 300,000 let’s say in debt, so now you’re at that 600,000, so now you’re over that 500,000, and you’ve met your 200,000 in debt that you need to replace.

And now you’ve purchased that replacement property, everything is all good and the transaction is complete. Now, when it comes to refinancing or selling prior or after the transaction, we always recommend our clients to do to complete refinancing once the 1031 exchange transaction is completed. If you were to refinance prior to entering a 1031 exchange, that would be considered debt that is added onto the property.

And so that would be something that you do need to carry forward as highlighting here on these slides to go forward in the transaction. So always is best to complete the transaction refinance, and now you have the new debt and you’re focusing on it is not something to worry about when you’re completing the exchange itself. So what are some considerations for entering a 1031 exchange? Again, first and foremost, always be consulting with, you know, the appropriate team members, whether it be a CPA.

Again, this is really highly specialized transactions though it has been in practice for, you know, 101 years now. It is still specialized and not every qualified intermediary, CPA, or real estate attorney is familiar with certain transactions. So definitely having the appropriate team members involved at your side to ensure that this transaction does go smoothly is important.

First and foremost, obviously with a qualified intermediary and being an integral part of the transaction selecting a qualified intermediary is important. It is still an unregulated industry so there aren’t…so as I mentioned previously, there aren’t specific guidelines other than that the qualified intermediary has to be a complete third party to the ultimate seller.

So that means it could technically be your neighbor, that could technically be your friend putting funds into their account. But obviously, if you’re putting into your friend’s account, how much do you trust your friend? Do they have all the protocols in place? Do they know what a 1031 exchange is? And these are just some examples of the cases we’ve gotten years ago, but where fraud and abuse where qualified intermediaries were mishandling people’s funds, commingling the proceeds and didn’t have the proper places in place.

And as you can see millions and millions of dollars were lost. So definitely selecting a qualified intermediary that’s knowledgeable from an expertise standpoint, obviously, for the protection of your funds as this could be the livelihoods of some of these exchangers. So in order to do due diligence your QI should require an audit on policies and procedures. We run ourselves through a third-party audit every single year to make sure that our policies and procedures are compliant and that we’re doing what we’re saying we’re doing.

So security device, so an escrow agent or trustee to ensure that the money can’t be moved without a signatory approval of both the escrow agent and as well as the client. So again, that dual control proceeds are held and never commingled. So each of our exchanges have their individual exchange account tied to their exchange is never been lumped into a trust account or a bank account of the qualified intermediary, and it’s not tied by us, again tying it to the taxpayer.

And again, don’t just rely on some insurance policies though, you know, we do have liabilities and errors and omissions insurance to cover the values of all of our exchanges. But again, there should be other policies in place to protect ultimately, what could be your livelihood. So the identification rules and requirements. So those first 45 days becomes the most time crunch, you know.

I would say the most difficult part when completing a 1031 exchange is the timing. So how many properties get tax payments? So making that first 45 days solely for your client. Again, I would say day zero and day one starts at the time the proceeds and the sale is completed. But I would say day zero is what’s going to ultimately help.

So the leg where you can do ahead of time prior to the ultimate sale and entering in those first 45 days, as you can imagine a month and a half to find a replacement property or properties to complete the transaction can happen pretty quickly. But the IRS has given us different ways for our exchanges to identify. The first and most commonly used rule is the 3 Property or Standard Rule, where doesn’t matter the asset class type or fair market value of the property, you get three slots for identification.

And you can put that in as a physical piece of real estate, a triple net property, maybe a DST to fill up the value. Again, we do recommend the clients or the exchanger use all three slots because after those first 45 days, whatever is on the list, is provided to the qualified intermediary for purchase to complete the transaction will be set in stone.

So it’s very important that you feel confident about the properties that you’re putting on the list and you’re not just looking to putting something on there and hoping that it sticks. And I’ll go over why when it comes to when you receive the funds a little bit later. So maybe now the standard three rule, you know, isn’t meeting what you’re looking for as an exchanger so maybe you want a little bit more cushion to provide more properties than that.

So IRS gave us the second rule the 200% Rule or the 2 * value rule. So again, using the simple figures that we used in an example earlier, that 500,000 threshold now you can identify properties up to a million dollars, whether that’s, you know, 10 properties at 100,000, or maybe five properties at 200,000. However, it shakes up as long as it doesn’t amass that 200% Rule that million dollar threshold, you can list it on the property as a list on the identification list again to provide it to the exchanger.

And the last rule and maybe not the most commonly used rule is the 95% Rule. This is if it needs to be more than a 3 Property Rule and it doesn’t fit within the 200% Rule as well, now, you have the 95% Exemption Rule. And this indicates…the exchanger then has to close on 95% of the properties that are put on the list for identification.

So as you can imagine that could be and especially in a complex real estate market that can be difficult to accomplish. In addition to maybe not having all the proceeds available to actually do so as well. So we really do see most of our exchanges falling within that 200 or 3 Property Rule. But again, large commercial real estate company or maybe you’re diversifying your portfolio across different DST as an example a Delaware Statutory Trust investments that 95% rule will come into play.

So now you’re asking Justin, how does a taxpayer identify? First and foremost in writing or we are in the…you know, with how we operate in the 21st century so it can also be doesn’t have any physical writing it be through email or a form that the qualified intermediaries provide you, or worksheet is how we do it here at GTC Americas.

It must be unambiguously described. So it can’t just be I’m looking to invest somewhere in California. It has to be 123 Main Street, San Jose, California 95126. Or point something, .4256 interest in 123 Main Street, a DST used as an example of how. But it must most importantly be unambiguously described.

And has to be signed by the taxpayer and sent to the qualifying intermediary within that 45 days. Again, if we don’t receive that number on midnight so 11:59:59 on the midnight of the 45th day, that would be considered a failed exchange. And then go over as I promised. What happens if the taxpayer doesn’t submit the ID form?

The QI can…if there is an executed contract and signed so fully executed within the first 45 days, a qualified intermediary can use that as a form of identification to complete the exchange. Another query here does the taxpayer have to complete the ID form for the property within the ID period? Of course, that does have to be completed otherwise, it would be considered a failed exchange.

And, again, going on feeling confident about what you’re moving forward with a 1031 exchange. If you don’t identify so again on day 46, it would be considered a failed exchange. The exchange won’t be able to receive the funds because we didn’t receive a form, there was no properties on the list funds are returned on day 46.

If we do receive a form, we’re past the 46-day funds can’t be returned until day 181. The reason being because IRS…again, as a qualified intermediary we’re supposed to be completely segregated not related to the exchange and they can’t have constructive receipt of the funds. If we were just to dispose of those funds at any point throughout the transaction, the IRS can dim that the client had constructed history the entire time.

And as a qualified intermediary also looking to our business practices and potentially put all the exchanges that we’ve ever facilitated at risk. So both as an exchanger and as a qualified intermediary, it’s important to make those decisions and why either at day 46 or 181, those funds would be returned. So as promised the partnership discussion.

So as we highlighted earlier in the presentation partnerships may use this section 1031 exchange, but partners may not use a 1031 exchange. And the reason being it has to do with the taxpayer continuity because the LLC is the ultimate taxpayer in a 1031 exchange, so it has to be the same entity doing the purchasing and the replacement property. And as you see on the slide here, parties are viewed as owning an indirect ownership interest in the property so i.e.

only partnership interest, and those cannot be done in a 1031 exchange. But that doesn’t rule out that it can’t be facilitated or there isn’t a way to have the interest as you can imagine, when it comes to selling or a taxable event, everyone especially within a partnership may have their own individual interest.

And maybe some want to do a 1031 exchange and some do not. So how do we accomplish this? First and foremost, advanced tax planning. So again, before if the group is thinking about selling again consulting the CPA and figuring out ways to accomplish this transaction. And the way to accomplish that based on 2007 Tax Preparer Disclosure Rules is what’s called a drop and swap.

So again, advanced tax planning is done for this. This isn’t something that you want to lean to the last minute or write down before the sale. It is considered to be a little bit risky when it comes to but it is very commonly done and facilitated within the 1031 exchange guidelines. And so essentially, what the drop and swap does is those partnership interest ones that are maybe wanting to do a 1031 exchange, or the instance where couple members want to just cash out and other members want to move forward in the partnership.

Those members would drop out so their interest so they would drop into a tenant in common ownership and directly into the real estate. So instead of…they would be their own individual taxpayers so instead of the LLC now being the taxpayer. Each of them would have their own direct ownership for the same membership interest that they had in the partnership now is just down direct ownership into the real estate.

And then because they are their own taxpayers and it is same taxpayer continuity they have their own decision making, and they can decide either to cash out or move forward in a 1031 exchange. Again, with some advanced tax planning, this is always be consulting either real estate attorneys, or real estate professionals by moving forward with this type of transaction as it does come with some potential auditing risks.

Some other exchange issues doesn’t really come up too frequently but, you know, they are asked there’s an installment sale. And so where are those payments for real estate property is broken up over typically several years, very rarely is it done over a few months. Again, as you can imagine since it’s done over several years, it doesn’t fall within those 180 day timeline so it’s not typically involved in a 1031 exchange.

But when it does happen the first thing to note here is that the initial closing or the transfer dates of that initial payment does start the exchange timeline. And whether it’s paid throughout the six month window or not, will then make the decision for why you would want to move forward in exchange or not. So there’s that.

Some other exchange issues, so a deed in lieu. So this will be the case where a lender accepts a deed to relieve the debt obligation. So there may be a taxable gain event, so the tax basis and the debt loan relief. So putting the exchange into the exchange transaction before the deed in lieu process you can definitely get…if you are thinking about doing this, definitely be consulting with a qualified intermediary and again, real estate professionals about moving forward with this transaction.

And again, always the debt relief portion will be that threshold of what you would need to be replaced in a replacement property to complete the transaction itself. Right on time here. So going over the different types of exchanges. So we’ve gone over the considerations for wanting to do an a 1031 exchange, some of the 1031 exchange basics, and now the five steps to completing a successful exchange.

So let’s go over the different types of exchanges that a client may think about doing or looking to complete with you as an advisor or a real estate professional. The most commonly used one is the forward exchange. And the reason why it’s the most commonly used is for the ease of versatility and ease and speed of implementation.

And outside the role of the qualified intermediary, which is the integral part to complete the transaction it really does operate as you’re selling and then buying a real estate property, which, you know, most people are looking to do and complete anyways when they do sell their property unless they’re looking to take those proceeds. And so for our visual learners, this is what the wheel of the transaction looks like.

So first and foremost, a qualified intermediary would engage the exchanger with an exchange agreement, will take assignment of the sales contract, will review that. Will gather the appropriate know your customer information, anti-money laundering information, and open up a third-party escrow account at one of our partner banks. Once those accounts are set up, our dedicated exchange expert managing the exchangers transaction would communicate with the title company or the closing agent provide them with the wiring instructions.

At the time of closing, the exchanger would just disperse of the lenders property to the buyer. The proceeds will go into that account, that third-party escrow account that we had set up, thus starting the exchange transaction. So highlighting the full scope of the 1031 exchange transaction so those key dates here. So day one starts at the selling of the existing property.

So on the previous slide, highlighting that. We’ll start with day one of the transaction. Those first 45 days become the identification phase. So this is where you’ll be consulting with your real estate agents to find suitable replacement properties that meet your investment goals. And the full exchange timeline is 180 days. But I do recommend to be thinking about day zero is what I like to say is the most important of a 1031 exchange is the planning phase, it’ll make those first 45 days go a lot smoother.

And again, be able to wrap your mind around how to complete the transaction whether you’re familiar with the 1031 exchange process, or an experienced real estate professional. Timing tends to be the most difficult part in completing an exchange. So the more that you can leg where you can do previously, the smooth the transaction will go.

And that’s step two again to show the completion of the transaction. Once again the qualified intermediary, our role in the transaction we would engage the exchanger with an exchange agreement. Take assignment this time of the purchasing contract. Then once we verify the disbursement form, so whether it’s earnest money or the full disbursement for the purchase of the replacement property, we will then verify that form with the client, do a callback.

And then communicate with our partner bank to distribute those funds. The funds will then be used to purchase the seller’s property, the property goes over to the exchanger, thus completing the 1031 exchange transaction. If multiple properties are being purchased to complete the transaction, this process is a rinse and repeat and so all funds are disbursed out of the third party escrow account. Now, a commonly used exchange and as the name might allude to the reverse exchange basically highlights the forward exchange done in reverse order.

A thing to note here to know with our client’s exchanges, there will always be a forward component to a reverse exchange transaction even though you are…the most commonly used one is the buy first and sell later. So this may be advantageous to some exchangers because you are eliminating the identifying part because you’re purchasing a replacement property first, and then looking to sell the relinquished property later.

But there are a lot more moving parts that are involved with completing this transaction, which we’ll go over here in a few moments. So again, as I mentioned, the most commonly used one is the exchange last. So that is, you are buying the replacement property first and then selling and relinquish property later using those funds. Why first and foremost, reverse exchange might be difficult to complete is as a qualified intermediary, we’re not a financial institutions so you have to have…the exchanger has to have…either bring in outside money or secure lending to purchase that replacement property first.

And in most cases, as average real estate owners are the ones doing 1031 exchanges, maybe they are holding some debt on that relinquished property that needs to be paid off with the sale. So they’re unable to secure another mortgage or financing to purchase that replacement property or they don’t have the outside debt.

On top of that, because of the complications that are involved with a 1031 exchange, they tend to be a lot more pricier than your average forward exchange. And then ways to avoid a reverse exchange could be if you are contracted for the real estate sale, you could, you know put an extra earnest money to delay the closing. You could try and negotiate with the seller to let them know you’re looking to complete a 1031 exchange and need to align some dates whether it be a simultaneous close or a couple of days after the replacement property, however you want to negotiate it.

But there are cases where, you know, this is advantageous to clients and we do facilitate them pretty frequently. Especially with exchange and a potential upcoming change in the real estate market from a seller’s market to a buyer’s market, as a qualified intermediary, we see an uptick in reverse exchanges starting to be more coming in the next few months.

And so what does that visually look like? And so we incorporated if the client didn’t have funds to purchase the replacement property, so we included the lender here for our example in completing the 1031 exchange. So the accommodator or the exchange accommodation would get in an accommodation agreement with the exchanger. The lender would just assign the funds to that which will be a single member LLC that the client would set up.

The sole member of the LLC will be the accommodator. So this again so it’s the qualified intermediary or the E that they have set up will take title throughout this transaction until the exchanger is able to sell the relinquished property and redistribute the property title back to the exchanger. So the cash is then provided to the accommodator, it moves from the accommodator to the seller. The replacement property has taken title thus starting the reverse exchange transaction.

Again, the windows of the timeline are still the same 180 days, it’s now just in reverse order of looking to complete the exchange transaction. This slide just goes over what I briefly touched on and how the exchange method last is covered, the creation of a single member LLC.

We usually recommend our clients creating something that is familiar or they might be looking to create anyways with the 1031 exchange that way we can transfer it over at the completion of the transaction. If not, we can always dissolve it at the end of the transaction afterwards or the client. And so the step two in the completion of the Reverse Exchange so as I like to call this almost the Wheel of Fortune or the wheel of completing a 1031 exchange.

So now as promised, there is always that forward component of a 1031 exchange. And whether this happens simultaneously, or there’s a bit of a delay with the disbursement of the funds, the exchanger would engage the qualified intermediary. Again, it’s the same company but just different entities facilitating the transaction. Will engage with an exchange agreement take assignment of the sales contract, so the exchanger will disperse the relinquished property to the buyer.

Those funds would go into that third-party escrow account that we set up for the client. If it’s simultaneously, it’ll always be a passable entity to the accommodator. So again, the single-member LLC that’s holding title of the replacement property will take those cash to pay off any lending that was used to purchase the replacement property. And once all that’s complete, we’ll disperse the replacement property to the exchanger, thus completing the reverse 1031 exchange.

As you can see, there’s a lot more moving parts involved with a reverse 1031 exchange. But it does pique the interest of a lot of our clients because, you know, it does eliminate the potential stress of those first 45 days of finding a suitable replacement property. Just quickly going over here is another Build-to-Suit Exchange or Construction Exchange is similar to a reverse exchange in the aspect that the qualified intermediary would take title of the ultimate purchase replacement property in a case where there is a forward exchange and they’ll be using proceeds to either do some development or build up on an exchange.

So it’s combination again of a forward and reverse exchange. But I guess the most important thing to note here is that you can use 1031 exchange proceeds to do some development or improvements on a real estate asset. The only thing that can’t be done, it cannot be used on a property that you already have titled to, has to be a completely new asset that you’re looking to develop on. And so just rounding out the presentation here, just the best practices that JTC Americas comparing to some other qualified intermediaries that we’ve put into place.

Again, we’re able to facilitate all different types of 1031 exchange forward, reverse, build-to-suit exchanges. We do comply with federal tax regulations, how we protect our client’s exchange funds, FDIC insurance, qualified exchange accounts, highly ranked custodial banks. We do have our proxies and audited every single year and so we’re compliant with SOC1, SOC2 certification. I’d like to say we’re a technology company with a financial services background.

So we provide the industry’s best transparency when it comes into the 1031 exchange transaction through our purpose-built eSTAC exchange maker portal. The client can log into and track any money moving going out of the exchange account that we set up to them, any associated documents, and communicating with their exchange experts with 24/7 online access.

And so Jimmy, I’ve reached our quiz portion of or Q&A session of the presentation. I’ll hand it back over to you and look forward to those questions. I saw there’s a good amount that came in the chat.

Jimmy: Perfect. Well, thanks, Justin. That was awesome. Really detailed, really thorough presentation. Really appreciate your time today. Yeah, we switched things up we’re not doing a quiz we’re doing live Q&A instead. We’ve got about 10 minutes until the top of the hour, we might go over that.

But if anybody has to drop off at the top of the hour, I won’t hold it against you. But let’s dive into the questions here. We’ve got several great questions. And if you have a question please do use the Q&A tool in our Zoom toolbar. I’m not sure we’re going to get to all of them but we’ll get to as many as we can. Stephanie asks, when must we pay the taxes? So when does the tax bill actually come due Justin?

Justin: So it comes due when it’s realized with the completion of the transaction, so it’d be in doing your upcoming tax year. So if you don’t do a 1031 exchange and you sell and take the proceeds, that’s typically when the tax bill would be due in your tax year. There are some other tax deferral methods whether or not be a 1031 exchange or an opportunity zone. So you do have that 180-day window if you do decide to go into the opportunity zones otherwise, it would be assessed at the completion of the sale.

Jimmy: Excellent.

Justin: Due within the tax-paying year when the transaction was completed.

Jimmy: Excellent. Kay asks, does a 1031 also delay recaptured depreciation?

Justin: So it doesn’t delay recaptured depreciation because you are doing that throughout the ownership of the real estate asset but there is no…so there is the depreciation recapture tax, but it is deferred. So no, there’s no gain or loss in that when you are doing a 1031 exchange.

So you could be doing that throughout the ownership of the transaction and it’s just focused on the capital gains tax.

Jimmy: Got you. Stephanie had a question about…it was slide number 10. She asks, non real estate items? There was a point in slide 10, if you want to bring that back up again why do a 1031 exchange? You started talking about the different tax amounts. Tax amounts can exceed 20 to 30% real estate, 40 to 60%, non-real estate items. I think she had a question on what you meant by that maybe you could clarify while you pull that up.

Justin: Let me pull that up. So the non-real estate item. So as mentioned in the presentation that, you know, personal property…so previously to 2017, before the tax revenue got personal, personal property could have been used in a 1031 exchange.

Now specifically focused on the real estate. So this goes into like if there was chairs, or the HVAC system, people are selling different parts of the real estate transaction that are involved in some of these sales, those could have been exchangeable. But now post the tax code change now specifically just focuses on real estate. So now, when you’re thinking about doing a 1031 exchange, the point here was just to touch on that when you’re doing the real estate sale you could be facing what I think it’s now over 30% so 35% that will be capital gains tax minus any depreciation recapture that’s been done over the years.

Again, consult with your CPA to understand what your potential tax could be. And if it’s even advantageous to do a 1031 exchange based on your tax situation. As a QI, we don’t have a window into that. But now you’re also facing a potential 40 to 60% taxes on non-real estate items. So you could be…and then depending on federal and tax state, each state is different how this is all applied.

So that’s why it’s always…it’s just basically to highlight what taxes could be coming due your way with this sale, and why it might be advantageous to do a 1031 exchange. But ultimately, it’s mostly to touch on consult with your CPA, before you do a real estate sale to really understand what your full picture is because a 1031 exchange could be beneficial or could not be.

Jimmy: Right. But just to be clear, non-real estate is no longer eligible for 1031s. When did that go into effect, the TCJ was signed into law in December of 2017. Do you know when that went into effect?

Justin: So it was that 2018 year the rules went into effect. And so that was a big change for the 1031 exchange base because artwork, major car companies that were leasing real estate assets or construction companies that had held all these appreciated assets, now can no longer do 1031 exchange like cars, things like that.

Jimmy: Got you. So Stephanie had a clarification on a question. She meant when are taxes ultimately due if one keeps rolling into another 1031? I think the answer is they’re not due until…they’re never due right? If it passes on to your heirs upon death…

Justin: Correct.

Jimmy: …step up to fair market value, but maybe you can clarify that.

Justin: No, you’re exactly right. You know, the reason why a lot of people like doing a 1031 exchange, it is a great estate planning tool. And the term swap to drop is the common practice for that. So you can keep rolling over those deferred taxes into either a physical piece of real estate or why DSTs have become such, you know, an advantageous investment, it’s, you know, becomes a more passive ownership.

And, you know, it’s owned and managed by a lot these larger commercial real estate companies. But, you know, they just keep rolling it over until they pass away, and their heirs are the beneficiaries to their estate, going to step up in basis, and then those taxes don’t become due. It only become due by the time you no longer decide to do a 1031 exchange, or potential I guess ownership change of the real estate asset itself that could be a taxable event as well.

Jimmy: Yep. Toine has a couple of related questions here about the 45-day period. Does the 180-day period include the 45-day identification period? And then there’s a related question, what if someone changes their mind and wants to identify another property during those 45 days?

So two-part question there.

Justin: Yeah, great question. So to answer the first part the 45 days is included in the 180 days. So you can think about it you’ll have 45 days to identify and the remaining 135 days to complete the transaction. So for the full 180 days or six months is the 1031 exchange transaction. And then to answer the second question, you can interchange you can swap out properties as much as you like within those first 45 days.

It’s only up until midnight of the 45th or day 46 whatever is on that list will be set in stone. And then working with your qualified intermediary and your respective real estate professionals you can determine which ways to identify would be most advantageous to complete the transaction. Whether it be the Standard Rule, the 200% Rule, or the 95% Rule.

And again, you know, we’re able to help with that.

Jimmy: Excellent. We’ve gotten this question coming in a couple of times. One’s from Rick here. Let’s see, can you comment on what QI fee is typically are charged?

Justin: So it varies obviously, depending on each qualified intermediary they each have their own respective fees and how they charge. What I will be seeing from the industry itself, it can range somewhere between 1000 to $2,000. And that’s just for forward exchange, you know.

When you’re looking into reverse exchange, it’s sometimes you know, 10 times more than that baseline fee again, for the complexities, the risk of the qualified intermediary holding title of the property throughout the transaction until the original property is sold. So you’re looking at somewhere between, you know, 10 to 20,000, on the reverse exchange side, or built-to-suit exchange side.

But those are usually, you know, industry standard of ranges of fees.

Jimmy: Got you. So, Tim asks a question, I think we already answered it. Do the proceeds from selling a business qualify and if not, are there alternatives that he may want to look at alternative tax advantage programs that you know of?

Justin: So I did touch on that. So businesses won’t…so oftentimes, we do get a business and it does coincide with, you know, a real estate sale. So the business sale itself would not be 1031 exchangeable. But if there is a real estate component, they can then take those proceeds from the sale and put it into a 1031 exchange.

Now, there are other tax-deferred vehicles like opportunity zones where they could take those capital gains and roll them into that type of investment. But that’s a whole other probably webinar that we could do on those types of investments.

Jimmy: I was hoping you’d say opportunity zones because I love opportunity zones. If you have any more questions on opportunity zones, we also run a website called OpportunityDB. I’m the founder of that site as well related to AltsDB, but we cover just opportunity zones there at opportunitydb.com.

Well, we are just about at the top of the hour, Justin, if you want to hang around see if we can get to some more of these questions. Hopefully, you have some more time, we can go a little bit over.

Justin: Yeah.

Jimmy: But let’s see before we get to the next question, if anybody does have to hop off, I want to make sure that they get this information that I’m going to share my screen right now. Which is…well, first of all, thank you for joining us today. We do have a resource page for advisors, you can get Justin’s presentation deck that’s been uploaded there, you can download that from there.

We’ll have the replay of this webinar available on this webpage, by tomorrow as well. And you can also download some of our free guides, including “The Investors Guide to Alternative Investments,” we also have “An Investor’s Guide to DSTs” on there as well, which is very relevant to today’s topic. You can either scan that QR code or you can type in that URL, altsdb.com/advisors to get access to more of our resources.

But let’s continue along with the questions we have here because we do have several more good ones. Let’s bring this back up. Here we go. Scott asks, Justin, can you comment on DSTs as part of a 1031 exchange what are some of the pros and cons?

Justin: So as I alluded to nice part is you don’t have to go all in a DST or all in a physical piece of real estate so completing a 1031 exchange, you could diversify your portfolio that way. Pros and cons of a DST investment.

Well one, it is passive so, you know, you’re moving from direct management of a physical piece of real estate, so having to deal with, you know, trash, tenants, and things like that. One of the potential cons could be, it’s not really an illiquid investment. So a DST when you are investing in it is meant to be you are going to be there for the full length of the investment, which, you know, it could range between 1 and 10 years.

Industry-standard we have seen these investments go full cycle somewhere between three and seven years, but again, that’s just depending on how the market is performing. Again, they’re managed by these large commercial real estate companies so you know, you’re generating a consistent income on a monthly basis similarly to what you would be doing on a regular real estate investment.

But again, it just depends on, you know, ultimately what your financial situation, what your ultimate investment goals are looking for, each person, you know, it varies and something for you to decide when going into a 1031 exchange.

Jimmy: Perfect. Stephanie asks, What if tax rates change, for example, what if they go up between when property one was sold, and properties two, three, or four are purchased, which rate is ultimately used?

Justin: So that’s a great question. And as discussed, you know, in a…it’s going to be done at the rate of the time the property is sold. Which is why, you know, it’s a good potential tax strategy if, you know, maybe you’re selling a property in a time where the tax rates are high.

And so you’re looking I’ll invest in another property maybe a DST investment for a few years, and maybe the change in, you know, who’s controlling the country changes it becomes a lower tax rate. And so at that point, maybe you’ll sell it and, you know, you’re okay with paying those taxes then. But, you know, most commonly once someone does enter a 1031 exchange, they typically like doing this as I mentioned the swap until you drop.

But that is what how people do use it as a way of, you know, being as a tax strategy on deferring those gains, but it is a sense to when it is currently sold.

Jimmy: Good. Kay asked the question about broker’s commissions and how that affects a 1031 and 1031 replacement property values potentially. The question is if I sell business property for $1 million, but there is a $100,000 commission to a broker for the sale, do I have to purchase a 1031 replacement property for 1 million or for 900,000?

Justin: Great question. It’ll always be based on the sales price of the relinquished asset. So the thinking of that $1 million would be the threshold number that you’re looking to purchase in a replacement property or properties.

And remember, it can be equal to or greater than, so you can buy one or maybe one property at 500,000 another at 550 just has to amass that million dollars. So minus the closing cost. Whatever you have in the proceeds in the qualified exchange account is not that number you want to reinvest.

Jimmy: All right, Deborah asks for a reverse exchange, how far in advance can it close relative to the completion of sale property?

Justin: So the purchase date will start the 180-day timeline. So once the initial purchase is made and is now within the held title by the exchange accommodator, single member LLC will start day one of the exchange timeline, so that will start 180 days. And so for the selling property, you’ll have 180 days to sell the relinquished property, which does again give some time to complete the exchange transaction.

Does eliminate maybe the stress of figuring out where I want to reinvest because you already completed that part. But then, depending on how the market is performing the selling might be the most stressful part. But once you purchase that starts day one.

Jimmy: Very good question from Toine again. The question is at some point…let’s see, well, the first part of his question is asking when does tax get paid? We already answered that. But the gist of the second part of his question is, what if the title of the property gets changed to a family member is there a tax implication there?

Justin: So it depends on when you’re changing the titling. So if you’re changing the titling prior to entering a 1031 exchange, so again, you know, taxpayer continuity. So now, you know, maybe they’ve grouped it under an LLC, or it’s changed to a family member, specifically family member, that’ll be the same one that has to do the purchasing. So then they can completely exchange under that new titleship as long as it is prior to completing a 1031 exchange.

So it’s after the…if 1031 exchange is completed, you know, they’ve held the property for a year and now they’re changing it into a new family member, that would be a taxable event since it is not the same taxpayer that’s been paying the property previously. So again, you would want to consult that. Because I’m assuming then again it’ll be someone who’s not related to the ownership of the real estate. So for the instance, I’d say, you know, it was, you know, husband and wife that purchased a replacement property and they want to group it under LLC.

Since they’re both members of the LLC, it’s a continuity again, taxable event changing title but they’re not completely different owners of the property.

Jimmy: Got it. Moving along another question here from Stephanie. She wants to know are 1031s allowed for what she terms work real estate, for instance, farms, vineyards, solar farms, etc.

Justin: Yes. So again, those…so it’s business use and those cases whether it’s, you know, a farm it’s very commonly and especially people do 1031 exchanges with their farmland. So vineyards again, something that’s been held for investment purposes, or even solar panels, things like that. So we do come into cases where…not solar panels, solar turbine, wind turbines again land held for investment could all be qualified for a 1031 exchange.

We do run into cases where mineral rights, so oil rigs and lands that you can go into the direct mineral rights for where these oil rigs are held you can 1031 into and out of those types of investments. So work rights are definitely something that’s 1031 exchangeable.

Jimmy: Excellent, great answer there. That’s good news. Rick wants to know if you can comment on the use of IRA funds for 1031 exchanges.

Justin: So, unfortunately, IRA funds are not something that could be used in a 1031 exchange. Now, if you were to take those IRA funds to invest in let’s say invest in a DST or into a physical piece of real estate, then down the line once that…let’s say the DST goes full cycle, then you can do a 1031 exchange.

But you couldn’t take it…it has to be real estate to real estate, as we did cover in the presentation to 1031 exchange qualifiable.

Jimmy: Okay, excellent. Let’s see we’re way over time now. I think we got…I’ll do one more question here. If our answers weren’t clear, or we didn’t get to your question, you can reach out to us at [email protected]. And then Justin, your email I think was [email protected]. Did I get that right?

Justin: That’s correct.

Jimmy: Okay, good. I will type in those email addresses into the chat in a moment here while Justin answers our final question of the day, which is from Mark. Mark wants to know can you also do a 10 I’m sorry, can you also do a 199A as well as a 1031.

Justin: So there are two separate lines of the IRS tax code. So, unfortunately, there are no combining of different I guess lineage of the different tax codes. So 1031 is specifically for this different type of investment.

For instance, it’s like even though opportunity zones is another tax deferral vehicle there’s no way to combine a 1031 exchange with an opportunity zone investment. So they are specifically designed for their own line of transaction.

Jimmy: Yep, good answer there. I do like to say sometimes that opportunity zones can rescue a failed 1031 exchange. But that’s a different topic for another day. Justin, thanks so much for being here today. Thanks for your time. Great presentation. Please do email me [email protected] or Justin, [email protected] if you have any other questions that we haven’t been able to get to today.

I just posted our email addresses in the chat. And finally, please do head to altsdb.com/advisors to download a copy of today’s slides. And we’ll have the replay of the webinar up there by later today or tomorrow, as well. Thank you to all of our participants today. Thank you JTC Americas for sponsoring today’s webinar.

I’ve been Jimmy Atkinson, co-founder of AltsDB with Justin Amos at JTC Group and JTC Americas. Thanks so much, everybody. Appreciate it.

Justin: Thank you. Take care.