NHBR Article
Maneuver on state tax shakes real estate industry [Continued]
Tuesday, December 8, 2009
By Bob Sanders
Alex Iskandar, chief executive of Lebanon Property Management, and his wife Bonnie are playing the same waiting game as other New Hampshire real estate investors on the state’s 1031 Exchange interpretation.
Iskandar, who has a Ph.D. in environmental science and worked for the Army Corps of Engineers for 25 years, purchased 320 acres of land with a farmhouse in Lebanon in 2000 for $1 million. After securing the necessary permits to develop the land, he sold it in 2005 at a $4 million profit.
Iskandar used that money to help purchase a commercial building in Hanover. He could have purchased it under the same name he used to sell the other property, but following an attorney’s advice to protect him from liability, he bought it under IKI 45 Lyme Road LLC (owned by him) and BPI 45 Lyme Road LLC (owned by his wife). They were assured that he would not have to pay any capital gains tax if he did so.
Iskandar said his federal return was one of the “lucky ones” to be audited, and the IRS allowed the tax deferral, but the DRA did its own audit and sent him a bill for $400,000.
“It’s because of the name change. It’s a technicality that nobody knew about,” said Iskandar. “I exchanged land that doesn’t produce income to an income-producing property that pays taxes to New Hampshire and the federal government, and the state of New Hampshire comes hunting for money.”
Iskandar said he would be able to pay the money, but that’s besides the point, he said.
“It will discourage investors,” he said. “It will discourage me to stay in New Hampshire. If they are not friendly with Section 1031 here, I’ll do the exchange in another state. New Hampshire may get a few bucks, but it is hurting itself in the long run. The impact on business will be severe.” – BOB SANDERS
Section 1031 for Investors & Professionals 