When you get right down to it, Investing is all about Value and Trust.
Value is a product of trust. The trust your clients have in you. The trust you have in your people, strategies and systems. And the trust you have in your business advisors. No matter how big you are, public or private, and in what industries or sectors you do business, we can help you work smarter and reach your goals. At Capital Oversight “Authenticating Trust with confidence“, is our mantra. Have a look at the services we offer, below. And let’s talk.
What is iScritinize?
iScrutinize is a specialized investor monitoring solution that provides corroborative examination and introspection of your personal investment. iScrutinize validates the objectives, management, investment, reporting, and disbursements and remittance of the investment or fund.
Monitoring against Ponzi schemes should best be undertaken by well-informed individual investors, because history shows that most schemes only after substantial harm against investors is perpetrated. Today investment protection and oversight is increasingly important as financial fraud become more sophisticated. iScrutinize comprehensive solution can easily detect and identify area of concern in your investment, fund, advisor or firm.
The Benefits of iScrutinize
Peace of mind, Security, and Trust Validation
Investment/Fund is Verified
Five area checklist of authentication
Notification report of concerns within 72 hours
Understanding and Knowledge of your investment
Assistance in recovery and return of funds
Knowing Ponzi schemes and other financial frauds is appropriate to reflect on a criminological understanding of fraud. Applying routine activities theory, crime occurs as a function of the presence of a motivated offender, the availability of suitable targets and a lack of capable guardians. Fraud is motivated by a combination of an individual’s personality and situational factors. Fraud occurs when an opportunity for fraudulent activity exists and the perceived likelihood of detection is low. It has been argued that the world of finance is one that vulnerable and attractive in terms of fraudulent behavior.
Attractiveness of Fraud
Organizations within the financial services industry are attractive for two key reasons. First, fraud perpetrated in such a context may involve significant financial rewards dependent on the size of the financial asset pool managed by the organization. Second, individuals within the organization, particularly senior management and chief executive officers (CEOs), can take the opportunities, as a function, of their legitimate control over the organizational financial asset pool to perpetuate fraud and protect themselves from detection.
Firms within the financial services industry, by their nature, constitute a high-risk context where significant opportunities for fraud exist. Major financial fraud is able to be committed by those who hold organizational positions that facilitate the fraud within a context of legitimacy: as often quoted, ‘the best way to rob a bank is to own one.
Informed & Educated Investors
Ponzi perpetrators will probably always exist, but their success depends on finding individuals willing to invest in their schemes. The more informed and educated investors and financial advisers become, the less likely they will become victims of financial fraud.If investors do not question or follow their fund managers closely, they are potentially facilitating a fraudulent Ponzi perpetrator.
It is up to investors to do their due diligence when making any kind of investment decision, especially when a high-profile investment adviser is promoting securities not registered or listed on normal exchanges or for which limited public information is available.
iScrutinize is provides independent oversight. The primary benefits of this solution are focused on, validation, transparency, peace of mind, comfort, and knowledge, that your fund or investment is executed according to its planned utilizations and prospective objectives.
Absolutely, nothing in the iScrutinize service solution, warrants, obligates, subjects, suggest, imply, or propose that an investor should change, hire, terminate, or abandon, any existing relationship, investment accounts or fund, trading programs, holdings, or investment strategy, with your financial institution, broker, dealer, investment advisor or firm.
How we Identify Ponzi Schemes
1. High investment returns with little or no risk:
Usually there is a positive relationship between risk and return and schemes that promise high returns with low risk need to be looked at suspiciously.
2. Overly consistent returns:
Investment returns usually follow the business cycle. Returns are up when the economy is booming, and down in a recession. Investments that promise to pay the same return irrespective of business cycles are often a key feature of Ponzi schemes.
3. Unregistered investments:
Investments that are not registered with either the SEC or state regulators should be questioned.
4. Unlicensed sellers:
Federal and state securities laws require investment professionals and their firms to be licensed or registered. Most Ponzi schemes firms and professionals are not licensed or registered.
5. Secretive and/or complex strategies:
Ponzi schemes usually do not publish detailed information about their investments. They are referred to as “blind pools” wherein investors do not know exactly how their money is invested.
6. Issues with paperwork:
Ponzi schemes usually do not send regular performance statements or reports on clients’ investments, and instead are more likely to be inconsistent and error-prone in correspondences.
7. Difficulty receiving payments:
Ponzi perpetrators usually encourage investors to roll over their high returns and increase their investment holdings. Investors attempting to cash out their investments are more likely to face difficulties obtaining cash back. Ponzi perpetrators will encourage investors who want to cash out their investment to do so gradually or not at all.
What is 1031 Exchange?
Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.
The exchange can include like-kind property exclusively or it can include like-kind property along with cash, liabilities and property that are not like-kind. If you receive cash, relief from debt, or property that is not like-kind, however, you may trigger some taxable gain in the year of the exchange. There can be both deferred and recognized gain in the same transaction when a taxpayer exchanges for like-kind property of lesser value.
Who qualifies for the Section 1031 exchange?
Owners of investment and business property may qualify for a Section 1031 deferral. Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031.
What are the different structures of a Section 1031 Exchange?
To accomplish a Section 1031 exchange, there must be an exchange of properties. The simplest type of Section 1031 exchange is a simultaneous swap of one property for another.
Deferred exchanges are more complex but allow flexibility. They allow you to dispose of property and subsequently acquire one or more other like-kind replacement properties.
To qualify as a Section 1031 exchange, a deferred exchange must be distinguished from the case of a taxpayer simply selling one property and using the proceeds to purchase another property (which is a taxable transaction). Rather, in a deferred exchange, the disposition of the relinquished property and acquisition of the replacement property must be mutually dependent parts of an integrated transaction constituting an exchange of property. Taxpayers engaging in deferred exchanges generally use exchange facilitators under exchange agreements pursuant to rules provided in the Income Tax Regulations. .
A reverse exchange is somewhat more complex than a deferred exchange. It involves the acquisition of replacement property through an exchange accommodation titleholder, with whom it is parked for no more than 180 days. During this parking period the taxpayer disposes of its relinquished property to close the exchange.
What property qualifies for a Like-Kind Exchange?
Both the relinquished property you sell and the replacement property you buy must meet certain requirements. Both properties must be held for use in a trade or business or for investment. Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify for like-kind exchange treatment.
Both properties must be similar enough to qualify as “like-kind.” Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land. One exception for real estate is that property within the United States is not like-kind to property outside of the United States. Also, improvements that are conveyed without land are not of like kind to land.
Real property and personal property can both qualify as exchange properties under Section 1031; but real property can never be like-kind to personal property. In personal property exchanges, the rules pertaining to what qualifies as like-kind are more restrictive than the rules pertaining to real property. As an example, cars are not like-kind to trucks.
Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of:
• Inventory or stock in trade
• Stocks, bonds, or notes
• Other securities or debt
• Partnership interests
• Certificates of trust
Time limits to complete a Section 1031 Deferred Like-Kind Exchange?
While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two time limits or the entire gain will be taxable. These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters.
The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary. However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient.
Replacement properties must be clearly described in the written identification. In the case of real estate, this means a legal description, street address or distinguishable name. Follow the IRS guidelines for the maximum number and value of properties that can be identified.
The second limit is that the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier. The replacement property received must be substantially the same as property identified within the 45-day limit described above.
Are there restrictions for deferred and reverse exchanges?
It is important to know that taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from like-kind exchange treatment and make ALL gain immediately taxable.
If cash or other proceeds that are not like-kind property are received at the conclusion of the exchange, the transaction will still qualify as a like-kind exchange. Gain may be taxable, but only to the extent of the proceeds that are not like-kind property.
One way to avoid premature receipt of cash or other proceeds is to use a qualified intermediary or other exchange facilitator to hold those proceeds until the exchange is complete.
You can not act as your own facilitator. In addition, your agent (including your real estate agent or broker, investment banker or broker, accountant, attorney, employee or anyone who has worked for you in those capacities within the previous two years) can not act as your facilitator.
Be careful in your selection of a qualified intermediary as there have been recent incidents of intermediaries declaring bankruptcy or otherwise being unable to meet their contractual obligations to the taxpayer. These situations have resulted in taxpayers not meeting the strict timelines set for a deferred or reverse exchange, thereby disqualifying the transaction from Section 1031 deferral of gain. The gain may be taxable in the current year while any losses the taxpayer suffered would be considered under separate code sections.
How do you compute the basis in the new property?
It is critical that you and your tax representative adjust and track basis correctly to comply with Section 1031 regulations.
Gain is deferred, but not forgiven, in a like-kind exchange. You must calculate and keep track of your basis in the new property you acquired in the exchange.
The basis of property acquired in a Section 1031 exchange is the basis of the property given up with some adjustments. This transfer of basis from the relinquished to the replacement property preserves the deferred gain for later recognition. A collateral affect is that the resulting depreciable basis is generally lower than what would otherwise be available if the replacement property were acquired in a taxable transaction.
When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.
How do you report Section 1031 Like-Kind Exchanges to the IRS?
You must report an exchange to the IRS on Form 8824, Like-Kind Exchanges and file it with your tax return for the year in which the exchange occurred.
Form 8824 request:
• Descriptions of the properties exchanged
• Dates that properties were identified and transferred
• Any relationship between the parties to the exchange
• Value of the like-kind and other property received
• Gain or loss on sale of other (non-like-kind) property given up
• Cash received or paid; liabilities relieved or assumed
• Adjusted basis of like-kind property given up; realized gain
If you do not specifically follow the rules for like-kind exchanges, you may be held liable for taxes, penalties, and interest on your transactions.
Beware of schemes
Taxpayers should be wary of individuals promoting improper use of like-kind exchanges. Typically they are not tax professionals. Sales pitches may encourage taxpayers to exchange non-qualifying vacation or second homes. Many promoters of like-kind exchanges refer to them as “tax-free” exchanges not “tax-deferred” exchanges. Taxpayers may also be advised to claim an exchange despite the fact that they have taken possession of cash proceeds from the sale.
Terms & Definition
To assist you in understanding the concepts of a 1031 Exchange. Here is a glossary of the terms used in exchanging.
Basis – This is the starting point for determining the gain/loss in the transaction. Generally, basis is the cost of the relinquished property.
Boot – In an exchange of real property, boot is any consideration received by the exchanger other than real property.
There are two kinds of boot:
1. Cash boot: Cash boot is cash or anything else of value received by the exchanger as a result of the exchange.
2. Mortgage boot: Mortgage boot is any relief from debt the exchanger received as a result of the exchange. If the exchanger receives boot in any form, he or she will be taxed on the amount of boot received.
Buyer – The party that acquires the relinquished property from the exchanger.
Capital gain – Generally speaking, this is the difference between the sales price of the relinquished property less selling expenses and the adjusted basis of the property.
Constructive receipt – The critical question in a deferred exchange is whether the exchanger has control over the proceeds during the exchange period. During the exchange period, the exchanger’s control or access to the exchange proceeds must be substantially limited and restricted to avoid having the exchange disallowed by the IRS.
Deferral – The tax on an exchange transaction is not paid at the time of the transaction. Rather, it is paid at the time the replacement property is ultimately sold. Deferral is accomplished by carrying over the basis of the exchanger’s relinquished property to the replacement property, making any necessary adjustments for additional consideration paid.
Direct deeding – Commonly used to pass property from the exchanger to the buyer and then from the seller to the exchanger. At the direction of the Qualified Intermediary, title passes directly to the ultimate owners without the Qualified Intermediary being in the chain of title.
Exchange period – The period during which the exchangor must acquire replacement property in the exchange. The exchange period begins on the date the exchangor transfers the first relinquished property and ends on the earlier of the 180th day thereafter or the due date (including extensions) of the exchangor’s tax return for the year of the transfer of the relinquished property.
Exchangor – Same as taxpayer. IRC 1031. The section of the Internal Revenue Code that specifies the terms and conditions under which the exchangor may exchange certain types of property without recognition of capital gain taxes.
Identification period – The period during which the exchangor must identify replacement property in the exchange. The identification period starts on the day the exchangor transfers the first relinquished property and ends at midnight on the 45th day thereafter.
Like- Kind Poperty ,This tern refers to the nature or character of the property, no its grade or quality. Generally real property is liked kind, to all other real property, as long as the property are held for investment or productive use in a trade or business. However, for personal property exchanges the relinquished property and replacement property must be in either the same general asset class or the same product class. For example, an airplane for an airplane.
The Qualified Intermediary is one of the safe harbors created by the IRC regulations, also called the “QI.” The QI acts on behalf of the exchangor as a facilitator of the 1031 exchange. The QI must be an independent third party and is designated by the exchangor to receive the proceeds from the sale of the exchangor’s relinquished property. In effect, the QI sells the relinquished property and uses the proceeds to purchase the replacement property.
Any like-kind property. Examples of properties that are not 1031 eligible include: stocks, bonds, personal residences, LLC interests or stock in trade or inventory.
The property that the exchangor owns at the beginning of the exchange. This is the property the exchangor wishes to dispose of in the exchange.
This is the property the exchangor intends to acquire in the exchange and the property with which the exchangor ends the exchange.
A reverse exchange occurs when the exchangor closes on the replacement property prior to closing on the relinquished property.
The party that owns the replacement property which the exchangor wishes to acquire.
The party that is performing the exchange and will receive the deferral on the sale of property.
Adviser Check is a Capital Oversight service solution to assist investors, in the research and authentication the professional backgrounds of brokerage firms and brokers currently or formerly registered with FINRA or a national securities exchange, as well as current or former investment adviser firms and representatives.
Adviser Check information is drawn from filings by regulators, firms and investment professionals. It includes current licensing status and history, employment history and, if any, reported regulatory, customer dispute, criminal and other matters. It should be the first resource investors turn to when choosing whether to do business or continue to do business with a particular firm or individual.
With AdviserCheck, you will get:
• Information about brokers and brokerage firms
• information about investment adviser firms and representatives
• Obtain online background reports, (if available*)
• Educational information for investors
In addition to providing information about investment adviser representatives currently registered with a state securities regulator, Adviser Check also includes individuals who:
• have been registered with a state securities regulator within the last ten years, or
• (1) have ever been the subject of a final regulatory event
(2) convicted of or pled guilty or no contest to a crime
(3) have been the subject of a civil injunctionor civil court finding involving a violation of any investment-related statute(s) or
(4) have been a respondent or defendant or the subject of an arbitration or civil litigation which resulted in an award, decision, or judgment for a customer that has been reported on a registration form.
Why Choose Us
- Excellent client service .
- Innovative Tools and In Depth Research .
- Value for your Money .
- Guaranteed Security .
- Expertise team tailored for you .
What Client’s Say
Capital Oversight informed me about a person in Texas, who tried to open an ATT commercial account with 25 lines and cell phones, after changing my corporate information with the secretary of State. The person(s) also used the company’s Tax ID number. Since then our company’s information has being monitored by Biz-Mon!Martin L, Biz-Trac client since 2006
I received a call from a Collection Agency, stating our company owed over $67K on a commercial net account. The account was 90 days past due. We gave Capital Oversight a call, & found that all our company’s information was changed with the Secretary of State by a fraudulent office. Capital Oversight helped us in the investigation & prevented further loss.Craig V, Biz-Trac client since 2003
My company got a call from Medical Supply company saying, ‘He want to verify a pending application that we submitted.’I said,Nobody from us made such application. We lost over $160K, in resolving this fraudulent play. If only we has Biz-Mon, we would have been notified that someone fraudulently changed & used our company’s name.Lisa B, Biz-Trac client since 2010