The Fargo Dam and FM Diversion project has far reaching financial impacts.
That wrenching pit in your stomach that arrives when you finish your income tax filing and gaze at the total tax bill that is due.
The FMDA (Fargo Dam and FM Diversion Authority) expects their first offer to acquire land to be their final offer. A “take it or leave it” style negotiation where the alternative is the FMDA, Fargo, Cass threatening the use of Eminent Domain.
Untimely sales create tax headaches and for some those tax bills can reach into the millions.
Being prepared for the looming tax bill is the key.
1033 Exchanges can assist Fargo and Cass County landowners that are facing unexpected tax bills by the Fargo Dam and FM Diversion Project.
Across the Midwest, the growth of infrastructure has been overwhelming. The long-term benefits of these new roads, pipelines, diversions and transmission lines will hopefully be worth the cost. However, in nearly all of these projects, it’s the local landowner who’s paying the biggest price today. He or she is usually helpless to prevent these projects from running right through their backyard; often across land that’s been in their family for generations.
Once the landowner has agreed to “just compensation” for the targeted property, he or she is often surprised to find the IRS knocking on the door asking for a share of these proceeds.
While enduring an oftentimes painstaking negotiation process, the landowner is left with two harsh realities:
1. The taking of his or her private land. 2. Forcing the landowner to pay capital gains tax on a sale he or she never asked for or wanted.
The 1033 Exchange can defer current taxes, and even recapture capital gains taxes paid on money received up to four years ago.
If you find yourself in this situation, you generally have a few options, which may include:
1. Pay the capital gains tax and use the remaining cash as you wish. 2. Do a 1033 Exchange by buying a “like-kind” replacement property of equal or greater value to your proceeds. No capital gain tax is paid, but no remaining cash either. 3. Do a 1033 Exchange using a DST (Delaware Statutory Trust) as your replacement property. No tax paid, and remaining cash dependent on amount of leverage utilized in the DST.
In most cases, options 2 or 3 will be preferable to most people. If you do not have another piece of like-kind property to buy, or at a price you’re willing to pay, option 3 may be a perfect fit for you.
With all the chaos involving the Fargo-Moorhead Diversion, the tax implications of the landowners are often overlooked.
There will be an informational meeting July 10th & 11th at the Hickson Community Center.
For more information on meeting time contact Tyler Liffrig at 701-770-5425 or 1-888-878-0279.