BankRI teams with Calif. firm to offer <br>‘1031’ property exchanges

They’re obscure and require expert handling, but for savvy real estate investors across the nation, they’ve saved millions in capital-gains taxes on property sales. And now, through a new alliance, Bank Rhode Island plans to introduce more local investors to “1031” exchanges.
The concept is actually fairly simple: If you have an investment property that you bought for $100,000, for example, and you sell it for $200,000, you’d normally have to pay the capital-gains tax on the $100,000 difference. But if you use all the money to buy a property of equal or higher value, it can be considered an “exchange,” with no immediate tax liability.
The tricky part is complying with the Internal Revenue Service’s requirements, which include, among other things, that in-between deals, you put the money in escrow with a certified 1031 exchange intermediary, and that you identify a “replacement” property within 45 days of the closing and actually buy the property within six months.
That’s where BankRI can now help. Late last month, it announced a partnership with San Francisco-based Churchill Exchange, a firm that specializes in 1031 exchanges and has been doing them for years, primarily in California, where they are far more popular than here.
The company has been expanding its reach, and when it looked for partners on the East Coast, BankRI was a good fit, said Churchill Exchange founder and president Marc Spiegelman.
The bank’s strong local ties, Spiegelman said, will help his firm connect with local businesses, and the bank will benefit because 1031 exchanges create “a lot of meaningful deposits.”
When Churchill Exchange first contacted BankRI last summer, said David M. Ferreira, the bank vice president who worked with Spiegelman, “we pretty much had to come up to speed with what a 1031 exchange was, but it seemed like a good value proposition for our customers,” and a way to expand BankRI’s offerings.
Churchill Exchange has been depositing some of its clients’ money with BankRI since December, but the intermediary service was only launched late last month, and both partners are still working on marketing materials, Spiegelman said. So as of last week, no local deals were yet in the pipeline, but he’s laying the groundwork.
“David Ferreira gave me a list of eight title companies, and I called every one of them and had a very good reception,” he said. “I will be meeting with them in the next couple of weeks individually, and based on those conversations, we’re very excited.”