Multi-Unit Franchisee Magazine Issue IV, 2011 | Page 67

However, finding the property, securing a contract, and having it scored by the
franchisor took many months. Securing
building permits took more time. Once
the land was acquired, construction began.
Unfortunately, the late purchase consumed
120 calendar days of the 180 available in
a 1031 exchange. The construction crew
completed as much as possible, but at the
end of the 180 days the building was not
100 percent complete, resulting in a reduced

Knowledge of the
primary exchange
rules can help
franchisees take
advantage of taxdeferred exchanges
and avoid potential
risks when trying
to improve their
bottom line.
tax deferral. At the start of the exchange,
the franchisee had the right intent, but the
exchange timeline was compromised by
the extended time to negotiate, close on
the land, and secure the permits to start
construction.
In hindsight, had the franchisee located property or was in contract for the
replacement property at the time of the old
property sale, their anxiety of meeting the
180-calendar-day burden and incurring a
tax they intended to defer could have been
reduced. The franchisee could not delay
their first leg closing. Knowledge of the
primary exchange rules can help franchisees
take advantage of tax-deferred exchanges
and avoid potential risks when trying to
improve their bottom line.
Andy Gustafson, Certified Exchange Specialist, serves as a managing member of Atlas
1031 Exchange, LLC, a nationwide accommodator of Internal Revenue Code Section 1031.
To date, he has accommodated 497 exchanges
representing $432.7 million in exchanged
value and deferral of $21.6 million in taxes.
Contact him at 850-496-0090 or andgus@
atlas1031.com.

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*During 2011 April & May dates for franchise and retail business books

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• Five time-tested success drivers
for greater franchise growth

Multi-Unit Franchisee Is s u e IV, 2011



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9/23/11 6:36 AM