CosmicCowboy
05-16-2007, 12:10 PM
I know of a guy here in San Antonio that just sold his two ranches to buy a new "big" ranch. The major part of his net worth was tied up in ranch land. He was set to close in a couple of weeks.
The money was parked with the outfit in the story below because he was going to do a 1031 exchange.
They guys at this company declared Chapter 11 and then transferred all the assets offshore and disappeared. The money is gone. The bad guys are gone.
To top it off, the guy will now have to pay capital gains on the 8+ million he had received on selling the two ranches because the flip into the new ranch wasn't completed.
The dream ranch he worked all of his life for is gone and he owes the IRS millions.
I'm pretty sure I would hunt those guys down like dogs and kill them slowly if it was the last thing I ever did...
http://www.mysanantonio.com/business...t.2b09441.html
1031 Tax Group files for Chapter 11
Web Posted: 05/15/2007 07:51 PM CDT
Jennifer Hiller
Express-News Business Writer
A company holding at least $26 million belonging to South Texas real estate investors has filed for bankruptcy.
The 1031 Tax Group LLC filed for Chapter 11 reorganization in New York on Monday.
Eight investors in San Antonio, Boerne and Uvalde are owed more than $26.6 million and are among the top 20 creditors with the largest unsecured claims against the company, according to court documents.
Another two Houston investors are owed $4.2 million.
But that's just the beginning.
More than 300 investors across the country are owed an estimated $151 million.
The bankruptcy throws into question whether — and how much — each of the investors will be able to recover.
People placed between tens of thousands and $10 million with a Richmond, Va.-based company, The 1031 Tax Group, and its subsidiaries. The average amount that clients entrusted with the company was $550,000.
"You've got investors who have millions at stake and investors with $50,000 at stake, and to any of those investors this is a disaster," said Tim Bannwolf, partner at Bracewell & Giuliani in San Antonio, which has a half-dozen local clients who placed money with the company.
Local investors caught up in the financial turmoil used a company called National Exchange Services QI Ltd., the San Antonio subsidiary for The 1031 Tax Group, which has offices on San Pedro Avenue.
The investors were using a common tax-deferral technique, called a 1031 exchange, when they deposited money from the sale of various properties with the third-party company.
There's nothing exotic about the transaction. The 1031 is named for a section of the Internal Revenue Service code, which is meant to encourage investment and reinvestment in real estate.
It's also called a "like-kind" or "tax-free" exchange because it lets investors sell a property and then buy a similar one within six months while deferring capital-gains taxes from the original sale indefinitely.
National Exchange Services was supposed to provide the mechanics of the exchange and to act as a safe harbor from capital-gains taxes.
But starting in April, as investors tried to access their money to purchase other real estate, they were told it wasn't available and that the third-party company was having "a financial crisis."
"These are folks who have worked their entire lives to build some wealth. They followed the law," Bannwolf said. "They woke up one day and couldn't get their money back."
The company cited a "liquidity crisis" in its filing, along with the $151 million it owes people.
But it also lists $154 million in assets. Most of those assets, however, are in the form of $132.4 million in outstanding notes to a company called Investment Properties of America, which is owned by Edward Okun, who also owns The 1031 Tax Group.
Okun, a Toronto native, has been active in real estate development and property management for more than 30 years, according to the Web site for Investment Properties of America.
It appears, based on court documents, that Okun borrowed money from the pool of exchange money for his other businesses, then placed that money in long-term investments.
The anticipated collateral pool to pay creditors is expected to include real estate, malls, warehouses and industrial facilities, according to court documents.
Capitol Aggregates Ltd. was the largest San Antonio creditor. The company is owed $8.1 million, according to court documents.
But many of the San Antonio investors are individuals and families.
National Exchanges Services QI LLC was sold last year to The 1031 Tax Group.
Before the sale, National Exchange Services kept its clients' money in segregated money-market accounts at banks, where each person's money and interest could be tracked easily.
After the sale to the umbrella company, National Exchange Services didn't handle people's money but operated as a sales office for the umbrella company.
According to a statement from The 1031 Tax Group, the companies involved in the bankruptcy filing include 1031 Advance 132 LLC, 1031 Advance Inc., 1031 TG Oak Harbor LLC, Atlantic Exchange Company Inc., Atlantic Exchange Company LLC, Exchange Management LLC, Investment Exchange Group LLC, National Exchange Accommodators LLC, National Exchange Services QI Ltd., National Intermediary Ltd., NRC 1031 LLC, Real Estate Exchange Services Inc., Rutherford Investment LLC, Security 1031 Services LLC and Shamrock Holdings Group LLC.
The money was parked with the outfit in the story below because he was going to do a 1031 exchange.
They guys at this company declared Chapter 11 and then transferred all the assets offshore and disappeared. The money is gone. The bad guys are gone.
To top it off, the guy will now have to pay capital gains on the 8+ million he had received on selling the two ranches because the flip into the new ranch wasn't completed.
The dream ranch he worked all of his life for is gone and he owes the IRS millions.
I'm pretty sure I would hunt those guys down like dogs and kill them slowly if it was the last thing I ever did...
http://www.mysanantonio.com/business...t.2b09441.html
1031 Tax Group files for Chapter 11
Web Posted: 05/15/2007 07:51 PM CDT
Jennifer Hiller
Express-News Business Writer
A company holding at least $26 million belonging to South Texas real estate investors has filed for bankruptcy.
The 1031 Tax Group LLC filed for Chapter 11 reorganization in New York on Monday.
Eight investors in San Antonio, Boerne and Uvalde are owed more than $26.6 million and are among the top 20 creditors with the largest unsecured claims against the company, according to court documents.
Another two Houston investors are owed $4.2 million.
But that's just the beginning.
More than 300 investors across the country are owed an estimated $151 million.
The bankruptcy throws into question whether — and how much — each of the investors will be able to recover.
People placed between tens of thousands and $10 million with a Richmond, Va.-based company, The 1031 Tax Group, and its subsidiaries. The average amount that clients entrusted with the company was $550,000.
"You've got investors who have millions at stake and investors with $50,000 at stake, and to any of those investors this is a disaster," said Tim Bannwolf, partner at Bracewell & Giuliani in San Antonio, which has a half-dozen local clients who placed money with the company.
Local investors caught up in the financial turmoil used a company called National Exchange Services QI Ltd., the San Antonio subsidiary for The 1031 Tax Group, which has offices on San Pedro Avenue.
The investors were using a common tax-deferral technique, called a 1031 exchange, when they deposited money from the sale of various properties with the third-party company.
There's nothing exotic about the transaction. The 1031 is named for a section of the Internal Revenue Service code, which is meant to encourage investment and reinvestment in real estate.
It's also called a "like-kind" or "tax-free" exchange because it lets investors sell a property and then buy a similar one within six months while deferring capital-gains taxes from the original sale indefinitely.
National Exchange Services was supposed to provide the mechanics of the exchange and to act as a safe harbor from capital-gains taxes.
But starting in April, as investors tried to access their money to purchase other real estate, they were told it wasn't available and that the third-party company was having "a financial crisis."
"These are folks who have worked their entire lives to build some wealth. They followed the law," Bannwolf said. "They woke up one day and couldn't get their money back."
The company cited a "liquidity crisis" in its filing, along with the $151 million it owes people.
But it also lists $154 million in assets. Most of those assets, however, are in the form of $132.4 million in outstanding notes to a company called Investment Properties of America, which is owned by Edward Okun, who also owns The 1031 Tax Group.
Okun, a Toronto native, has been active in real estate development and property management for more than 30 years, according to the Web site for Investment Properties of America.
It appears, based on court documents, that Okun borrowed money from the pool of exchange money for his other businesses, then placed that money in long-term investments.
The anticipated collateral pool to pay creditors is expected to include real estate, malls, warehouses and industrial facilities, according to court documents.
Capitol Aggregates Ltd. was the largest San Antonio creditor. The company is owed $8.1 million, according to court documents.
But many of the San Antonio investors are individuals and families.
National Exchanges Services QI LLC was sold last year to The 1031 Tax Group.
Before the sale, National Exchange Services kept its clients' money in segregated money-market accounts at banks, where each person's money and interest could be tracked easily.
After the sale to the umbrella company, National Exchange Services didn't handle people's money but operated as a sales office for the umbrella company.
According to a statement from The 1031 Tax Group, the companies involved in the bankruptcy filing include 1031 Advance 132 LLC, 1031 Advance Inc., 1031 TG Oak Harbor LLC, Atlantic Exchange Company Inc., Atlantic Exchange Company LLC, Exchange Management LLC, Investment Exchange Group LLC, National Exchange Accommodators LLC, National Exchange Services QI Ltd., National Intermediary Ltd., NRC 1031 LLC, Real Estate Exchange Services Inc., Rutherford Investment LLC, Security 1031 Services LLC and Shamrock Holdings Group LLC.