Article Discusses Chapter 11 Case Of Real Estate Exchange Services, Inc.
An article in the Atlanta Journal discusses the recent Chapter 11 filing of Real Estate Exchange Services, Inc., Ch. 11 Case No. 08-85871-pwb (filed December 17, 2008). Since the initial filing, Jeffrey K. Kerr, CPA has been appointed Chapter 11 Trustee in the case. He recently filed a Motion to Convert the case to a Chapter 7 (click here for the motion and brief).
Excerpts from the article -
A prominent metro Atlanta businessman who served as an intermediary for real estate investment clients has sought bankruptcy protection because he can’t meet withdrawal requests.
Ron Raitz, founder and president of Real Estate Exchange Services Inc. in Marietta, filed for Chapter 11 protection in the U.S. Bankruptcy Court’s Northern District of Georgia on Wednesday.
Raitz, a Dalton native who started the 7-employee business 15 years ago, said the company was caught in the liquidity crunch that holders of some auction rate securites find themselves in from holding bonds that investors — spooked by the current market — don’t want to buy...
Raitz’s company is what’s called a qualified intermediary exchange firm. The Internal Revenue Service normally taxes capital gains from the sale of an office tower or apartment building, provided it’s sold at a profit.
But under the “1031 exchange” rule in the federal code, the seller of a commercial property can defer payment of capital gains taxes on profit from that sale. But 1031 only allows the seller to do that if he or she purchases another commercial property that’s equal to or greater in cost than the total net sales price of what was sold.
What’s more, all profit from the sale of the original property has to be put toward the new property, which also must be used for a commercial investment purpose.
And the IRS gives the seller up to 180 days to close on a new property otherwise the profit will be taxed. In the meantime, those funds have to be held by what the IRS calls a “qualified intermediaries,” who make money by charging a fee for serving as the temporary repository and taking some of the return on investments they make with that cash.