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W W W. M A I N E B I Z . B I Z 17 F E B R UA R Y 2 2 , 2 0 2 1 F O C U S W E A LT H M A N A G E M E N T / R E T I R E M E N T A 2015 commercial real estate study found that 88% of replacement properties were ultimately sold through a taxable sale. "It's a good thing," Johnson says. "It encourages people to stay invested." Jason Favreau, a principal with BerryDunn in Portland, says if inves- tors don't have it as an option, it could have an effect on real estate buying and selling decisions. For example, an investor who sold a $3 million property and had to pay $300,000 in taxes would have less for a down payment on a new property, which would likely result in a smaller loan, leaving $2 million to be reinvested. "Does the investor want to turn a $3 million investment into a $2 million investment?" Favreau asks. "Property owners want to make decisions about buying and selling real estate based on the investment merits, and tax consequences sometimes influence those decisions." He says the 1031 exchange helps facil- itate transactions "by allowing the invest- ment itself to drive those decisions." e exchange allows a gain on sale to be delayed, Favreau says, emphasizing the word delayed. It preserves historical tax information through the new prop- erty, so items like depreciation recapture continue to follow the property owner. "e 1031 exchange is not designed to provide a free lunch to a seller," he says. To list or not to list Paszyc says common themes he sees with 1031 deals are investors who want to unload a complicated management- intensive property for something easier to manage, or investors who want to buy something bigger. He says that property used in like-kind exchanges tend to be larger, newer and have lower vacancy rates. "However, we have seen exchanges that have come in all shapes, sizes and quality," he says. Some investors, concerned about the possible change, are listing prop- erty now to take advantage of the tax code while it exists, Paszyc says. Consequently, investors may not list if the tax benefit is no longer an option. get to know the At Norway Savings, our Asset Management Group believes in Family Asset Management. Simply put, it means we do right by you and your loved ones. More than an advisor, as a fiduciary we will help you manage your wealth by putting your interests first. Every family has a story. Let us help you write your next chapter. FAM 207. 482.7920 | NorwaySavings.bank FAMILY ASSET MANAGEMENT I N V E S T M E N T M A N AG E M E N T • T R U S T S E RV I C E S • FI N A N C I A L A DV I C E • E S TAT E P L A N N I N G Not FDIC Insured • No Bank Guarantee • May Lose Value C O N T I N U E D O N F O L L OW I N G PA G E » A sampling of recent 1031 exchanges Commercial real estate deals using 1031 tax exchanges run the gamut of property types, as some recent Maine exchanges show. 701 Forest Ave., Portland: Chris Paszyk, of Boulos Co., says lack of inventory has prompted a recent trend of exchange buyers taking a risk by buying an empty building. The seller was asking $1.9 million for the 12,658-square-foot former Rite-Aid, but sold it for $1.5 million. The new owner, CAM Cony LLC, plans renovation for multiple tenants. 416–420 Fore St.: Lee and Jason Talevi bought the Old Port building from 416 Fore Street LLC for $4.095 million last fall brokered by Compass and Porta & Co. The new owners said long-term retail leases held by the ground-floor commercial tenants in the 150-year-old building are what made it an attractive investment. 274 Western Ave, Augusta; 340–380 Cumber- land Ave., Portland; and a California winery: This $20 million chain of 1031 exchanges, engineered by Joseph Porta of Porta & Co., involved Falmouth-based Casey Investments LLC, which sold a California winery and bought 274 Western Ave, in Augusta, from Northland Enterprises, which in turn bought 340 and 380 Cumberland Ave. P H O T O / C O U R T E S Y N O R T H L A N D E N T E R P R I S E S PHOTO / COURTESY COMPASS COMMERCIAL BROKERS P H O T O / C O U R T E S Y BO U L O S C O The 1031 exchange is not designed to provide a free lunch to a seller. — Jason Favreau BerryDunn

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