Methods and investment instruments for performing tax-deferred real estate exchanges

• US 6,292,788 B1
• Filed: 12/03/1998
• Issued: 09/18/2001
• Est. Priority Date: 12/03/1998
• Status: Expired due to Fees

• Current Assignee: American Master Lease LLC
• Original Assignee: American Master Lease LLC
• Inventors: Roberts, Neal, Franklin, Michael, Runnels, Charles, Andrews, James
• Primary Examiner(s): Millin, Vincent
• Assistant Examiner(s): Kanof, Pedro
• Application Number:
  US09/205,633
• Time in Patent Office: 1,020 Days
• Field of Search: 705/36, 705/37, 705/38, 705/39, 705/35
• US Class Current: 705/36.00T
• CPC Class Codes: G06Q 30/04 Billing or invoicing
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance
• CPC Class Codes: G06Q 40/10 Tax strategies

Abstract

Methods and investment instruments for investing in real estate are described wherein a portfolio of investment real estate is divided into a plurality of tenant-in-common deeds of predetermined denominations, and which are subject to a master agreement and master lease to form “deedshares.” Holders of the deedshares receive a guaranteed income stream from the master lease and yearly depreciation, without having to maintain or manage the real estate. The holders of deedshares are subject, under the master agreement, to a mechanism that enables the master tenant to purchase, or arrange for the purchase of the deedshares at fair market value (or some other calculable value) at the end of a specified term. Because the deedshares qualify as interests in investment real estate, they are eligible for tax-deferred treatment under §1031 of the Internal Revenue Code.

Claims

1. A method of creating a real estate investment instrument adapted for performing tax-deferred exchanges comprising:

aggregating real property to form a real estate portfolio;

encumbering the property in the real estate portfolio with a master agreement; and

creating a plurality of deedshares by dividing title in the real estate portfolio into a plurality of tenant-in-common deeds of at least one predetermined denomination, each of the plurality of deedshares subject to a provision in the master agreement for reaggregating the plurality of tenant-in-common deeds after a specified interval.

2. The method of claim 1, wherein encumbering the property in the real estate portfolio with a master agreement further comprises encumbering the real property with a master lease to a master tenant who pays rent to holders of the deedshares.

3. The method of claim 2, wherein creating the plurality of deedshares further comprises structuring the provision to include a put provision that allows holders of the deedshares to force the master tenant to purchase the deedshares at a calculable value after the specified interval and a call provision that allows the master tenant to force holders of the deedshares to sell their deedshares to the master tenant at a calculable value after the specified interval.

4. The method of claim 2, wherein encumbering the real property in the real estate portfolio with a master agreement further comprises including a sublease provision in the master lease, enabling the master tenant to sublease the real estate.

5. The method of claim 2, wherein encumbering the real property in the real estate portfolio with a master agreement further comprises including a maintenance provision in the master lease, requiring the master tenant to maintain the real estate.

6. The method of claim 2, wherein encumbering the real property in the real estate portfolio with a master agreement further comprises including an insurance provision in the master lease, requiring the master tenant to insure the real estate.

7. The method of claim 2, wherein encumbering the real property in the real estate portfolio with a master agreement further comprises including a tax pro vision in the master lease, requiring the master tenant to pay taxes on the real estate.

8. The method of claim 2, wherein encumbering the real property in the real estate portfolio with a master agreement further comprises including an extended term provision in the master lease, designating that the master lease extends beyond the specified interval.

9. The method of claim 2, wherein encumbering the real property in the real estate portfolio with a master agreement further comprises including a guaranteed rent provision in the master lease, designating that the master tenant pay a predetermined guaranteed income to holders of the deedshares.

10. The method of claim 2, wherein encumbering the real property in the real estate portfolio with a master agreement further comprises including a credit rating provision in the master lease, requiring that the master tenant have a specified minimum credit rating.

11. A method of performing a tax-deferred exchange of investment real estate under §

1031 of the Internal Revenue Code comprising;

transferring a first interest in investment real estate having a first value and being subject to a first debt from an exchanger to a third party;

using the third party to transfer title to the first interest in investment real estate to a buyer in exchange for money, proceeds of the transfer of the title to the first interest being held by the third party;

identifying deedshares having a second value equal to or greater than the first value and subject to a second debt equal to or greater than the first debt as a replacement property within a specified number of days of transferring title to the first interest in investment real estate, the deedshares comprising an undivided tenant-in-common interest in investment real estate that is subject to a master agreement including a provision reaggregating title to the investment real estate represented by the deedshares at a specified time;

closing the sale of the deedshares within a second specified number of days of transferring title to the first interest in investment real estate; and

transferring the deedshares and the second debt from the third party to the exchanger.

12. The method of claim 11, wherein identifying deedshares comprises identifying a combination of deedshares having different predetermined denominations that sum to the second value.

13. The method of claim 11, wherein identifying deedshares further comprises identifying deedshares subject to a master lease to a master tenant, and the master tenant pays rent to owners of the deedshares.

14. The method of claim 13, wherein identifying deedshares further comprises identifying deedshares subject to a provision for reaggregating title that comprises a put provision that allows the owners of the deedshares to force the master tenant to purchase the deedshares at a calculable value on or after the specified time, and a call provision that allows the master tenant to force the owners of the deedshares to sell their deedshares to the master tenant at a calculable value on or after the specified time.

15. The method of claim 13, wherein identifying deedshares further comprises identifying deedshares including a provision enabling the master tenant to sublease the real estate.

16. The method of claim 13, wherein identifying deedshares further comprises identifying deedshares including a provision requiring the master tenant to maintain the real estate.

17. The method of claim 13, wherein identifying deedshares further comprises identifying deedshares including a provision requiring the master tenant to insure the real estate.

18. The method of claim 13, wherein identifying deedshares further comprises identifying deedshares including a provision requiring the master tenant to pay taxes on the real estate.

19. The method of claim 13, wherein identifying deedshares further comprises identifying deedshares including a provision that the master lease extends beyond the specified interval.

20. The method of claim 13, wherein identifying deedshares further comprises identifying deedshares including a provision that requires the master tenant has a specified minimum credit rating.

21. The method of claim 13, wherein identifying deedshares further comprises identifying deedshares including a provision to appoint a real estate broker to sell the real estate after title to the real estate has been reaggregated at the specified time.

22. A method of creating a real estate investment instrument adapted for performing tax-deferred exchanges comprising:

acquiring real property;

encumbering the real property with a master agreement; and

creating a plurality of deedshares by dividing title in the real property into a plurality of tenant-in-common deeds of at least one predetermined denomination, each of the plurality of deedshares subject to a provision for reaggregating the plurality of tenant-in-common deeds after a specified interval.

23. The method of claim 22, wherein encumbering the real property with a master agreement further comprises encumbering the real property with a master lease to a master tenant who pays rent to holders of the deedshares.

24. The method of claim 23, wherein creating the plurality of deedshares further comprises structuring the provision to include a put provision that allows holders of the deedshares to force the master tenant to purchase the deedshares at a calculable value after the specified interval and a call provision that allows the master tenant to force holders of the deedshares to sell their deedshares to the master tenant at a calculable value after the specified interval.

25. The method of claim 23, wherein encumbering the real property with a master agreement further comprises including a sublease provision in the master lease, enabling the master tenant to sublease the real property.

26. The method of claim 23, wherein encumbering the real property with a master agreement further comprises including a maintenance provision in the master lease, requiring the master tenant to maintain the real property.

27. The method of claim 23, wherein encumbering the real property with a master agreement further comprises including an insurance provision in the master lease, requiring the master tenant to insure the real property.

28. The method of claim 23, wherein encumbering the real property with a master agreement further comprises including a tax provision in the master lease, requiring the master tenant to pay taxes on the real property.

29. The method of claim 23, wherein encumbering the real property with a master agreement further comprises including an extended term provision in the master lease, designating that the master lease extends beyond the specified interval.

30. The method of claim 23, wherein encumbering the real property with a master agreement further comprises including a guaranteed rent provision in the master lease, designating that the master tenant pay a predetermined guaranteed income to holders of the deedshares.

31. The method of claim 23, wherein encumbering the real property with a master agreement further comprises including a credit rating provision in the master lease, requiring that the master tenant have a specified minimum credit rating.

32. A method of creating a real estate investment instrument adapted for performing tax-deferred exchanges comprising:

acquiring real property;

encumbering the real property with a master agreement; and

using a computer to generate a plurality of deedshares by generating a plurality of tenant-in-common deeds of at least one predetermined denomination that divide title in the real property into a plurality of tenant-in-common interests, each of the plurality of tenant-in-common deeds being subject to a provision in the master agreement for reaggregating the plurality of tenant-in-common deeds after a specified interval.

33. The method of claim 32, wherein encumbering the real property with a master agreement further comprises encumbering the real property with a master lease to a master tenant who pays rent to holders of the deedshares.

34. The method of claim 33, wherein using a computer to generate the plurality of deedshares further comprises including in the master agreement a put provision that allows holders of the deedshares to force the master tenant to purchase the deedshares at a calculable value after the specified interval and a call provision that allows the master tenant to force holders of the deedshares to sell their deedshares to the master tenant at a calculable value after the specified interval.

35. The method of claim 33, wherein encumbering the real property with a master agreement further comprises including a sublease provision in the master lease, enabling the master tenant to sublease the real property.

36. The method of claim 33, wherein encumbering the real property with a master agreement further comprises including a maintenance provision in the master lease, requiring the master tenant to maintain the real property.

37. The method of claim 33, wherein encumbering the real property with a master agreement further comprises including an insurance provision in the master lease, requiring the master tenant to insure the real property.

38. The method of claim 33, wherein encumbering the real property with a master agreement further comprises including a tax provision in the master lease, requiring the master tenant to pay taxes on the real property.

39. The method of claim 33, wherein encumbering the real property with a master agreement further comprises including an extended term provision in the master lease, designating that the master lease extends beyond the specified interval.

40. The method of claim 33, wherein encumbering the real property with a master agreement further comprises including a guaranteed rent provision in the master lease, designating that the master tenant pay a predetermined guaranteed income to holders of the deedshares.

41. The method of claim 33, wherein encumbering the real property with a master agreement further comprises including a credit rating provision in the master lease, requiring that the master tenant have a specified minimum credit rating.