woody:

My understanding, Bill, is Exeter can maybe help these creditor/claimants out with what amounts to a "substitute" 1031 exchange, no? 

Ask me why--I have money tied up with LandAm 1031 also. I also have access to the Bankruptcy Court's docket there. The two Land Am cases have been "consolidated" to one case, entitled: "Land America Financial Group, Inc. et. al. -Jointly Administered Chapter 11 Case(s) Number 08-35994, Judge Kevin R. Huennekens, presiding. 

Yes, we can work with clients to ascertain whether there is anyway to assist them in completing their 1031 exchange by contributing out-of-pocket funds to a new 1031 exchange account in order to complete the acquisition of their replacement properties and hopefully preserve their tax-deferred status. 

Fred -

I, unfortunately, was with LES 1031 when it went down.  I have attached the website where all can go to file a Proof of Claim.  The address where the claim should be sent is on the front page, and to get to the document for Proof of Claim, click on the Documents button at the top of the screen.  http://chapter11.epiqsystems.com/clientdefault.aspx?pk=61832e15-08f8-42b6-930c-7849e9ffe32d

I also know that the FEA is working diligently to put together some sort of request of the IRS or Treasury to see if tax relief to the clients of LandAmerica may be granted due to this situation.  Their website is www.1031.org.  There are many of us who are working alongside our clients and doing everything we can to fulfill what we see as our ethical responsibility.

The Internal Revenue Service's Office of Chief Counsel issued guidance (INFO 2008-021) earlier this year regarding the income tax treatment involving a failed 1031 exchange when the Qualified Intermediary goes out of business. 

Hi Jeanrhee125,

Your post only contained "Hi"  Can you repost?

Sorry about that.

 I am one of the victims as well.  I am trying to hire a lawyer to deal with this situation.  I called a few and they all asked me tons of money, plus I don't know them at all.  It's a trust issue!  Please, can anyone recommend me a lawyer and give me their contact info? 

what do you do if your excchange is not comleted by the duedate and the companydoes go under  do you have a hardship exchange exchange for the

benefit of the 1031   tax benefit   please  reply.

Hi Annmarie,

No, there is no provision for a "hardship exchange."  I've posted a link to our website in a prior posting above that references an opinion from the Office of Chief Counsel from the IRS regarding a failed 1031 exchange due to the failure or collapse of a 1031 exchange Qualified Intermediary.  

Here is a copy of a letter requesting relief assistance that was filed with the Internal Revenue Service.  

December 4, 2008

The Honorable Eric Solomon
Assistant Secretary (Tax Policy)
Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, DC 20220

Re: Participants in Like Kind Exchanges Affected by the Bankruptcy of Land America 1031 Exchange Services. Inc.

Dear Mr. Solomon:

We are writing in regards to the plight of the large number of taxpayers that may be adversely affected by the recent bankruptcy filing of LandAmerica 1031 Exchange Services, Inc. ("LandAmerica").

LandAmerica served as a "qualified intermediary" under the safe harbor reflected in Treasury Regulation Section 1.1031(k)-1(g)(4), which permits qualified intermediaries to hold sale proceeds in connection with deferred like kind exchanges without causing selling taxpayers to be considered to be in actual or constructive receipt of the sale proceeds. We understand that when LandAmerica filed its Chapter 11 petition, it was acting as a qualified intermediary pursuant to approximately 450 exchange agreements.¹ Unfortunately, the current economic crisis creates considerable risk that other qualified intermediaries will fail, and hundreds, if not thousands, of additional taxpayers may find themselves in the same position as LandAmerica's current customers.

Taxpayers who are able to recover funds held by LandAmerica (or other failed qualified intermediaries) will generally wish to complete their like kind exchanges. However, LandAmerica has indicated that it will cease operations and may not honor exchange agreements. In such event, the most straightforward solution would be for LandAmerica customers to have replacement qualified intermediaries assume LandAmerica's duties under their exchange agreements (and take possession of sale proceeds currently held by LandAmerica). There is, however, no clear authority on the tax consequences of the bankruptcy of a qualified intermediary that is holding taxpayer funds. We are therefore concerned that the IRS will take the position that the use of a replacement qualified intermediary is not authorized under the qualified intermediary safe harbor and that an attempt to replace a bankrupt qualified intermediary would cause a deferred like kind exchange to be fully taxable.²

It would, of course, be unfair if customers of failed qualified intermediaries were not permitted to complete their like kind exchanges. We therefore respectfully request that the IRS issue a notice confirming that the assumption by a replacement qualified intermediary of the duties of a failed qualified intermediary under an exchange agreement will not cause a deferred like kind exchange to fall outside the qualified intermediary safe harbor at Treasury Regulation Section 1.1031(k)-1(g)(4).

Any guidance regarding failed qualified intermediaries should be issued as soon as possible. A taxpayer participating in a deferred like kind exchange must complete its exchange no later than the day which is 180 days after the date on which it transferred the relinquished property (and often sooner). Without immediate guidance, customers of failed qualified intermediaries may find it necessary to abandon their contemplated exchanges, in order to set aside funds needed to satisfy unanticipated tax liabilities.

We should emphasize that the relief that we are requesting is very limited in scope. We are not, for example, requesting that the Treasury Department extend the period within which taxpayers are required to complete their exchanges. That period is fixed by statute, and the Treasury Department may not unilaterally extend it.

We would be happy to provide you with further input on this issue at your convenience. Thank you for taking the time to consider our views.

Sincerely,

Jack J. Miles

Andrew H. Lee

cc:
Karen Gilbreath Sowell, Esq.
Deputy Assistant Secretary (Tax Policy)

Eric A. San Juan, Esq.
Acting Tax Legislative Counsel

The Honorable Douglas H. Shulman
Commissioner, Internal Revenue Service

The Honorable Donald L. Korb
Chief Counsel, Internal Revenue Service

¹ Clients of this Firm are among those taxpayers whose funds are still being held by LandAmerica pursuant to exchange agreements.

² We understand that the IRS might permit customers of failed qualified intermediaries to complete their like kind exchanges with funds obtained from other sources, but such a solution would appear to be impractical for most customers.

I am involved in a similar situation in Atlanta and am very curious about the courts positon on the 50 segregated accounts.  Do you know anyone who is close to the case that might know the details of how these accounts were set up and the documentation that was used?  Do you know when the court is expected to rule on this point?