Another Arizona MeltdownPosted on December 4, 2008 in Arizona Law Regarding Business and Real Estate
The meltdown of title-insurance company LandAmerica Financial Group Inc. has left scores of real-estate investors and entrepreneurs scrambling to recover money in what were supposed to be a short-term and no-risk arrangement. The investors, from Arizona retirees to a public company, had $400 million on deposit with the LandAmerica subsidiary to take advantage of a real-estate strategy known as a 1031 exchange. A 1031 exchange, named for a section of the U.S. tax code, lets investors delay capital-gains taxes on the proceeds from recently sold property, as long as the investor lets a third party hold the funds. They must reinvest the money in a new property within six months.
At the law firm of William A. Miller in Phoenix, we often tell client’s to go ahead and pay taxes now because the tax rates are historically low and buying again, may well not be wise. Yet, here is a reputable title-insurance company holding 1031 money until such time as the investor decides to reinvest it and poof, it’s gone.
If a lawyer does this in Arizona he loses his license and likely goes to jail. Why; because in Arizona lawyers cannot co-mingle funds. This is a historic wrong and once again, blood will flow in the streets and the lawyers will make a small fortune. What a mess. Someone needs to serve time based on these poor folks losing their hard earned money.