Important information
NA4830272
An investment in 1031 Exchange Program is highly speculative and involves a high degree of risk and is intended only for investors who do not require immediate liquidity. Prospective investors should carefully consider the following risk factors, together with any other offering documents before deciding to purchase interests in such a program.
- There is no public market for the Interests, and it is not anticipated that any public market will develop. The transfer of Interests may result in adverse tax consequences for the transferor. Investors of Interests may not be able to liquidate their investments in the event of an emergency or for any other reason. Investors are also specifically notified that Interests are not likely to be readily accepted as collateral for outside financing. Any purchase of Interests, therefore, should be considered only as a long-term investment.
- Investors will not have any vote or decision-making authority related to the sale of the Properties. If the Manager determines that the sale of one or more Properties is reasonable, the Operating Trust may sell the applicable Property without regard to the tax position, preferences, or desires of the Investors. Investors will have no right to approve (or disapprove) of the sale of such Property and may or may not be able to defer the recognition of gain for federal, state, or local income tax purposes when the sale occurs.
- A bankruptcy or insolvency of the Guarantor, inability of the Guarantor to meet or perform its obligations under the Guaranty, or assignment of the Guaranty by the Guarantor may adversely affect the Beneficial Owner of an Interest. The Master Tenant has no significant assets, and the Operating Trusts depend up on the ability of the Master Tenant or the Guarantor to perform under the long-term Master Lease. If the Guarantor cannot meet or perform its obligation under the Guaranty or if the Guarantor assigned its obligations under the Guaranty to an affiliate with inferior creditworthiness and/or financial resources, this would increase the risk of a default by the Master Tenant and adversely affect the Beneficial Owners.
- An Interest may not qualify under Code Section 1031 for tax-deferred exchange treatment, and even if it does a portion of the proceeds from an Investor's sale of their real property to be relinquished (“Relinquished Property”) could constitute taxable “boot” (as defined herein). Whether any particular acquisition of an Interest will qualify as a tax-deferred exchange under Code Section 1031 depends on the specific facts involved, including, without limitation, the nature and use of the Relinquished Property and the method of its disposition, the use of a qualified intermediary and a qualified exchange escrow and the lapse of time between the sale of the Relinquished Property and the identification and acquisition of the replacement property (“Replacement Property”). Neither the Sponsor nor its affiliates, counsel or agents are examining or analyzing any prospective Investor's circumstances to determine whether such Investor's acquisition of Replacement Property qualifies as a Section 1031 Exchange. If the factors surrounding a prospective Investor's disposition of the Relinquished Property and their acquisition of the Interests do not meet the requirements of Code Section 1031, the disposition of the Relinquished Property will be taxed as a sale and the IRS will assess interest and possible penalties for failure to timely pay such taxes. Also, merely designating an Interest in connection with an Investor's Section 1031 Exchange does not assure the prospective investor that there will be Interests available to purchase when such Investor executes the Purchaser Agreement Packet and actually causes his, her, or its qualified intermediary to transfer funds to complete the purchase of the Interests.
- Any personal property that may be part of the Properties, amounts used to establish reserves and impositions or other items not attributable to the purchase of real estate will not be treated as an interest in real estate and may be treated as “boot.” It's possible that such amounts will not be treated as boot and that reserves, if any, will be treated as cash boot. The IRS could take the position that the increase in the purchase price of the Property paid by Investors would not be considered as an interest in real estate and may be treated as “boot.” In the event any item is determined to be “boot,” the taxpayer will have current income for any such “boot” up to the amount of gain on the exchange of the real property.
- If, in a Section 1031 Exchange, money is received or deemed received in addition to the like-kind property (referred to as “boot”), then gain on the Relinquished Property is recognized up to the amount of boot. Although there is no direct authority on point (other than certain potentially favorable authority that allows taxpayers to treat certain transaction expenses as reducing amounts otherwise taxable as boot in a Section 1031 Exchange), prospective Investors should be aware that the IRS may take the position that certain costs paid or deemed paid from money received from the sale of the Relinquished Property are boot and, therefore, income to Investors. For example, the IRS may contend that some amounts paid into a Trust reserve and amounts paid in connection with an offering constitute boot received by Investors and not a reinvestment in real estate.
- Potential changes to Section 1031 Exchange rules may limit or eliminate the ability to defer taxes on gains from real property or Trust Interests, which could adversely affect a Purchaser’s exit strategy.
- No opinion or assurance is being provided to the effect that any individual prospective Investor's transaction will qualify under Code Section 1031. Such examinations or analysis are the sole responsibility of each prospective Investor, who must consult with his, her or its own legal, tax, accounting and financial advisors before purchasing an Interest.
The information provided here does not constitute tax advice. Because each investor's tax position is different, the benefits listed above may not be realized. A change in U.S. tax laws could also have impact on the benefits of investing in real estate. Invesco does not offer tax advice. Investors should consult with a tax professional for information regarding your own personal tax situation before making any decisions. Unless otherwise noted, all Section references are references to the Internal Revenue Code.
Definitions
Like kind: "like-kind" refers to real property that is of the same nature of character, even if it differs in grade of quality, and is held for business or investment purposes
Depreciation recapture: refers to the IRS's requirement to tax the portion of gain attributable to prior depreciation deductions
Capital gains: profit realized when a capital asset- such as real estate, stocks, or bonds, is sold for more than its purchase price
