Volume 1, Issue 2, November 15, 2005

This issue sponsored by SCI Real Estate Investments www.sciproperties.com Thank you to our sponsor for November, SCI Real Estate Investments

THE PRESIDENT’S CORNER

Dennis Helmick, CES® President, Exchange Facilitators Corporation, Seattle, Washington

At our Annual Meeting in Las Vegas, I stressed five goals that our Board of Directors wants to accomplish this year:

• Focus on the state legislative effort to include a model regulatory act; creation of a database for each state listing key legislators, regulators, industry allies; and a legislative calendar. Our hope is to have an FEA member team in place for each state to respond as needed.
• Create an FEA Marketing Program to brand our Association. We want to make the FEA synonymous with Protection and Service with both Referral Sources and the General Public.
• Focus on our Code of Ethics to refine our code, clarify our ethics administrative process, and thoroughly educate our members in our Code of Ethics.
• Build and enhance our Member Services Program to deliver a great variety of Affinity Program cost savings for our members.
• Increase and enhance our Educational Services to our Members. Two specific goals are developing a study guide for the CES® Test and a “Best Practices” Manual.

Each of these goal areas have a committee tasked to work on them. Our Association needs your help. Please volunteer! Thanks in advance for your help.

RECORD BREAKING CROWDS PACK THE ANNUAL CONFERENCE

Throughout this past year, FEA membership has grown significantly and many of these new members came out to support FEA at the Annual Conference. Total attendance at the Conference topped out at 515 - a new record for an FEA event! The Conference offered a wide variety of educational opportunities. As one member described the meeting, “Of all the professional conventions I attend this is one of the better for informational content.”

Friday night’s outdoor pool party proved to be a hit! Jim Shaw of CapHarbor provided excellent entertainment with his band, Red Rhythm. Members also enjoyed the unique performers, especially the caricaturists! One member commented: “I feel that the networking Friday Night Reception was the best event FEA has put together yet. In the outdoor atmosphere, networking was easy, comfortable, and we were able to hit a broad span of people. This was the hit of the conference - networking capabilities were the best. Great job!! By the way, the food and entertainment was awesome too.”

We would like to thank everyone that contributed to making the Annual Conference a large success. We appreciate the feedback from everyone who attended the event and took the time to fill out the survey. We will consider all your suggestions and we will work to make next year’s Conference even more successful!

And, let’s give one more, big thank you to our 2005 Annual Conference Sponsors:

PLATINUM: For 1031, Noble Royalties Inc., Citibank and TICA

GOLD: SCI Real Estate Investments, Deutsche Bank, The Pierini Company,
Triple Net Properties, LLC, 1031 Exchange Consultants, Matrix Capital Bank

SILVER: CapHarbor, TIC Real Estate Association, Inc., 1031 Property Watch, Inc., J.P. Morgan Escrow Services, CORE Realty Holdings, LLC,
Countrywide Bank, N.A., OMNI Brokerage, Inc., The Geneva Organization, Lockton Insurance Brokers, Inc., Republic First Bank,
Commerce Bank

EXHIBITORS: Upland Real Estate Group, Inc., Argus Realty Investors, LP, Barnett Shale Holdings, Inc., Merrill Lynch

Also, thanks to Core Realty Holdings LLC for providing the very handy tote bags!

2006 MEETING DATES- MARK YOUR CALENDARS!

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More details regarding registration, sponsorship, and program for the events will soon be available on the FEA website, under the “Calendar of Events” page.

NEW FEA BOARD AND OFFICERS ELECTED

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The FEA would like to recognize the new FEA Officers of the Board of Directors for 2006. They are the following:

FEA WELCOMES NEW MEMBERS

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FEA would like to extend a warm welcome to the following Members who joined in October!

FEA TO PUBLISH MEMBERSHIP DIRECTORY IN 2006
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During the first quarter of 2006, FEA will publish a membership directory listing all Regular and Affiliate Members, plus full contact information. This publication will offer an easy reference for all members to the more than 300 companies who comprise FEA. Look for details shortly.

CONGRATULATIONS TO THE NEW CES® DESIGNEES!
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We would like to congratulate the following individuals who passed the CES® exam this past October. There are now 206 individuals that have obtained their designation! The exam will be offered next at the Mid-Year Conference in Philadelphia, PA on Saturday, May 13, 2006. For more information on the CES® program check out their website at www.1031ces.com.

COURTING DISASTER
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Phil Jelsma, Luce Forward Hamilton Scripps LLP
Recently, I was carefully looking at a picture in the newspaper of a demolished block in New Orleans looking for a street address. A colleague asked why I was so interested in whether the property in the picture was for sale. I told him I had anumber of clients involved in Section 1031 exchanges and that street addresses of property for sale in a federal disaster area might be important.

Why? The Katrina Emergency Tax Relief Act of 2005 (HR 3768) provided extended due dates for taxpayers in the Katrina disaster area to file returns, pay taxes and perform certain time sensitive acts until February 28, 2006. Time sensitive acts include the 45-day identification period for delayed exchanges and the 180-day deadline for acquiring property in forward or reverse exchanges.

Revenue Procedure 2005-27 provides a list of time sensitive acts for taxpayer affected by a Presidentially declared disaster, or terrorism or military actions. Section 17 of Rev. Proc. 2005-27 provides that the taxpayer may use the postponement rules in Section 17 in lieu of the general extension dates provided by an IRS News Release or other guidance with respect to Presidentially declared disaster areas.

Section 17 of Rev. Proc. 2005-27 provides that the last day of the 45-day extension period or last day of the 180-day replacement period that falls on or after the date of a Presidentially declared disaster is postponed by 120 days or to the last day of the general disaster extension period authorized by an IRS News Release, whichever is later. A taxpayer is entitled to postponement if (1) the relinquished property was transferred on or before the date of a Presidentially declared disaster and (2) the taxpayer is an “affected” taxpayer (lives, or has a business in the covered disaster area) or who has difficulty meeting the 45-day identification or 180-day replacement period due to the Presidentially declared disaster for the following or similar reasons:

1. The relinquished property or replacement property is located in a covered disaster area
2. The principal place of business of any party in the transaction (such as a qualified intermediary, exchange accommodation title holder, transferee, settlement attorney, lender, financial institution or title insurance company) that is located in the covered disaster area
3. Any party to the transaction (or employee to the party) is killed, injured or missing as a result of Presidentially declared disaster
4. The document prepared in connection with the exchange or relevant land record is destroyed, damaged or lost as a result of the Presidentially declared disaster
5. A lender decides not to fund, either permanently or temporarily, due to a Presidentially declared disaster, or refused to fund a loan because the taxpayer’s flood, disaster or other hazardous insurance is not available due to the Presidentially declared disaster
6. A title insurance company has not been able to provide or required a title insurance policy to settle or close a real estate transaction due to the Presidentially declared disaster.

PARTNERSHIP ISSUES- ANNUAL CONFERENCE FOLLOW UP
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Richard M. Lipton, Esq., Baker & McKenzie

During the Annual Conference, Dick Lipton offered a great program on Partnership Issues. However, there was some confusion caused by some of his comments concerning the involvement of QIs in the sale of TIC interests. Dick has graciously prepared a detailed explanation to clarify any questions. To help you further in this regard, here is a link to Omni Brokerage’s site explaining Key Definitions: http://1031ticguide.com/definitions.html

There seems to be some misunderstanding or confusion caused by my comments at the FEA Annual Meeting concerning the involvement of qualified intermediaries (QIs) in the sale of tenant-in-common interests (TIC interests), most of which constitute securities for securities law purposes.

What I stated at the meeting was that QIs need to recognize that most TIC interests are securities. As a result, if the QI is not a licensed securities broker/dealer (and most are not), they cannot be compensated for referring a client to the securities broker/dealer involved in the sale. The QI can still be compensated for its services as a QI, and it can still perform its traditional functions in connection with such a transaction, but a securities broker/dealer cannot compensate the QI for a referral due to limitations in the securities laws. But, clearly, a QI can refer its customers to a securities broker/dealer who is selling TIC interests.

There are some sponsors of TIC interests that do not treat these interests as securities for securities law purposes. And some of these sponsors may compensate QIs for referrals.If the TIC interest is not a security under the securities laws (and some have been carefully designed to avoid securities law treatment), then the receipt of compensation in such circumstances will not put the QI at risk. On the other hand, I have reviewed thedocuments fora number of the offerings that are not treated as securities, and it is my view that many of them would beconsidered to be securities by the applicable federal and state authorities.If the TIC interest is later determined to be a security, andif the QI was compensated by the sponsor in such transaction, than the QI has received compensation in connection with the sale of a security, and that could put the QI at risk. Therefore, QIs should exercise caution in dealing with TIC interests that are not treated as securities. As long as the QI does not receive compensation (other than for its traditional QI services), the QI will not have any problems. But if the QI receives a referral fee and if the TIC interest is later determined to be a security, then the QI could also face liability if either the appropriate authorities (orthe purchaser) decides to bring legal actions resulting from the improper sale of a security.

DEAR FEA
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HERE IS ONE OF FEA’S FREQUENTLY ASKED QUESTIONS…

Question:
What type of computer software do you recommend for exchanges?

Answer:
Presently, I work for one of the large, national QIs. As I expect the answer to be with the others similarly situated, we use proprietary software. However, I was previously employed by a smaller regional QI and was assigned the task of locating software to manage our exchanges. What I found is that there is a true dearth of software out there for this task. (We can't go to the local office superstore and buy an off-the-shelf package like Quicken, which does everything we need.) I found only a couple of such packages, and neither one was as complete as I wanted. They all seemed to lack something -the ability to adapt to my growing business; the "horsepower" to process complicated exchanges. If I were building my own QI business from the ground up, I would speak to my computer vendors. I would probably start with a database program such as Access and have it customized to fit my needs. That being said, I know that several of the QIs, who are also title agents, have employed software experts to "get behind the code" and adapt/improve their title production software. (Dave Gorenberg, LandAmerica Exchange Company)

MEMBERS IN THE NEWS
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Granite Exchange Services, LLC Relocates to Roseville, CA
Granite Exchange Services, LLC (GES) opened the doors to its new national headquarters in Roseville, CA. GES will occupy the newly developed Rocky Ridge Corporate Center at the corner of Rocky Ridge Dr. and E. Roseville Parkway. Other tenants include Alliance Title and Colliers International.

Granite Exchange Services, LLC (GES), established in 1996, is a national “Qualified Intermediary” providing 1031 tax deferred real estate exchange services to investors, closers, realtors, CPAs, and Attorneys.

For more information, contact Michelle White or Justin Swift at 916-367-6620 or email michelle@ges1031.com.

HERE’S HOW YOU CAN SUBMIT NEWS TO THE EXCHANGE
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Do you have any exciting news about your company and/or employees or do you have suggestions for topics to be covered? Please use this form to provide FEA with that information and we would be happy to include that information in a future issue of The Exchange.

Interested is sponsoring an issue of The Exchange? Simply fill out this form and submit it to FEA headquarters.