04/12/2023

Copyright 2010 by Accruit, LLC: the only comprehensive, fully integrated 1031 like-kind exchange solution in America.

1031 Like-Kind Exchanges: Maximizing Cash Flow, Minimizing

Risk and Administrative Burden

Q: What is a 1031 Like-Kind Exchange (LKE)?

• Section 1031 of the tax code• Allows companies buying and selling assets to defer recognition of the gain

on sale if they reinvest proceeds in “like-kind” assets• Established part of tax law – since 1921

Q: What’s the Value of a 1031 Exchange? (Why Should Independent Producers Care?)

• Cash: Gain on a sale is usually ~40% (have seen rates approaching 50%; depends on state tax rates)

• Without LKE: sell $1M worth of real estate or equipment, pay IRS ~$400,000

• With LKE: sell 1M worth of real estate or equipment, defer gain, reinvest ~$400,000 back into your business

• Deferral is indefinite

Q: What Kinds of Assets are Eligible?

• 1031 exchanges best known in Real Estate• Also used in “personal property”: misnomer; refers to all non-real estate

assets held for business/investment use› Tangible assets like oil & gas equipment (incl. tubing and casing), energy

generation and transmission equipment, heavy equipment, fleet, manufacturing equipment, etc.

› Certain intangibles, like mineral rights, patents and licenses

Q: What Kinds of Assets are Eligible?

• Real Estate: ALL real estate is like-kind• Oil & Gas Field Machinery Examples:

• Rock drills• Rock drill bits• Casing, oil and gas field-type• Tubing, oil and gas field-type• Oil and gas field-type drilling

machinery and equipment (except offshore floating platforms)

• Drilling equipment• Drilling rigs• Bits, oil and gas field-type• Gas well machinery • Water well machinery• Well logging equipment• Derricks, oil and gas field-type

Oil and Gas Interests (Real Property)

• Working or Operating Interests› Lessee’s interest is considered a real estate interest for Federal income tax purposes› May contain equipment/other tangible property, giving rise to a “multi asset” exchange

• Royalties› Also considered real property interest for Federal tax purposes and would be exchangeable› Less likely to contain personal equipment; no “multi asset” exchange component

• Production Payments› Right to a mineral in place for specified amount, payable out of a percentage of the minerals› Considered “carved out” and not real property for Federal income tax purposes

Q: How do 1031 Exchanges Work?

• Structure sale as an LKE in advance (notification)• Tax code requires involvement of a Qualified Intermediary (QI -

disinterested third party)• 45 days to identify replacement asset• 180 days to complete the transaction• Cash must come to the QI

Several kinds of LKE

• Simultaneous Exchange

• Forward Exchange

• Reverse Exchange

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About Accruit: Largest business asset Qualified Intermediary

• Annual volume:› Over $6 billion in LKE transactions› $8B in assets under management› 250,000 exchange transactions per year

• Only patented 1031 exchange process in the nation• 500+ clients in over 20 industries • Billions of dollars of tax liability converted to operating cash flow• One-to-one client service

04/12/2023 Copyright 2010 by Accruit, LLC: the only comprehensive, fully integrated 1031 like-kind exchange solution in America. 10

About Accruit: Strong Partnerships

• Preferred or Exclusive Provider Relationships: › PLS, Network International, Ritchie Bros., EnergyNet, Associated Equipment

Distributors, FIS, NationaLease, IdeaLease • CPAs:

› Deloitte, RSM McGladrey Network, BDO Seidman, The Leading Edge CPA Alliance, Moss Adams

• Board Seat on Federation of Exchange Accommodators (FEA); CEO Brent Abrahm is President-elect, 2011› Direct state and federal regulation of Qualified Intermediary industry

04/12/2023 Copyright 2010 by Accruit, LLC: the only comprehensive, fully integrated 1031 like-kind exchange solution in America. 11

Q&A

• Questions?

04/12/2023 Copyright 2010 by Accruit, LLC: the only comprehensive, fully integrated 1031 like-kind exchange solution in America. 12

Let’s Talk

Dan BelgerVice President of Sales

866.397.1031 x107danb@accruit.com

Matt DevineDirector of Corporate Accounts

866.397.1031 x138mattd@accruit.com

For more information, including industry-specific analysis, case studies,white papers and tax resources, visit us online at www.Accruit.com