A 721 exchange is an exchange of real estate for units in a partnership.
Widely used for commercial real estate since its creation by the IRS, Sower Farmland Fund’s Legacy 721 Exchange now brings this simple and powerful solution to farmland owners, successors and tenants.
Why Perform a 721 Exchange?
The Legacy 721 Exchange allows farmland owners to defer capital gains taxes and avoid the loss of value that occurs during a traditional sale.
Converting your farm into Fund Units gives you:
–Capital Gains Deferment
–Asset Diversification
–Charitable Gifting Ease & Efficiency
–Asset Monetization
–Control
–Management Relief
–Legacy Preservation
–Flexibility to Retain, Sell, Gift or Divide shares to heirs efficiently and fairly
Your Farm
721 Exchange
Fund Units
Passive Ownership
Trusted By Industry Professionals.
Listen to Ag experts discuss the financial benefits resulting from a 721 exchange.
Read the Code of Federal Regulations
26 U.S. Code § 721 – Nonrecognition of gain or loss on contribution
(a) General rule No gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership.
(b) Special rule Subsection (a) shall not apply to gain realized on a transfer of property to a partnership which would be treated as an investment company (within the meaning of section 351) if the partnership were incorporated.
(c) Regulations relating to certain transfers to partnerships. The Secretary may provide by regulations that subsection (a) shall not apply to gain realized on the transfer of property to a partnership if such gain, when recognized, will be includible in the gross income of a person other than a United States person.
(d)Transfers of intangibles For regulatory author transferred to a partnership as sold, see section 367(d)(3).
Benefits of a 721 Exchange
While units are held, shareholders enjoy many benefits, including access to capital, income and the protection of diversified holdings.
Access to capital: Holders can pledge their units to borrow money for elder support care services through Legacy’s credit relationship with Farm Credit Services of America, without having to sell units and incur capital gains tax.
Income: Unit holders receive passive income as the units yield quarterly dividends and appreciation.
Protection with Diversity: Retaining unit ownership in a broad portfolio of farmland results in the ability to take advantage of future revenue sources derived from the entire portfolio – like wind, solar, wetlands, easements, mineral rights and of course revenue from crop production.
One of the most profound benefits is the ability to plan for one’s own estate as well as heirs. Unit ownership means a once static asset like farmland is able to be easily divided amongst heirs, providing shareholders with ultimate flexibility in gifting, bequeathing and retaining units for themselves.
Take Action
