Capital Gains, Questions and Answers

• Q. Is the ChIP Plan a 1031 Exchange?
• No. The ChIP Exchange is a simple qualified 501c3 transaction, under IRS code Section 1.1011-2 of the federal tax regulations (26 C.F.R. 1.1011-2) combined with an installment sale, as described in Section 453 of the code. Our program is unique in that we have contractually guaranteed that all money will pass through The Hartford Life Insurance company, as the professional manager of the non-profits funds. Every aspect of the transaction is accountable and accounted for.

• Q. What is the key benefit over a 1031 Exchange?
• Positive Cash flow. While 1031 exchanges have their benefits in the right situation, the key problem is that to get money out of the 1031, you are forced to take out a mortgage on the new property. You end up paying payments, which may not be your goal.  With the ChIP exchange, deeds, transfers, and title insurance go through escrow but after you close, you end up RECEIVING payments instead of paying payments. More important, those payments are coming from a $300 billion dollar financial institution, and you receive up to one and a half times your property’s value in total return. The tax savings can be invested.

• Q. What other advantage is there over a 1031 Exchange?
• A substantial tax deduction. Not only do you receive full value for your property from an A+ rated insurer and a positive cash flow, you can claim a tax deduction of approximately 25% of the value of the property. As an example, a $500,000 ChIP transaction would net an approximate $125,000 in tax deduction, depending on a few calculations.

• Q. What is the basis for the tax deduction?
• Your transaction partially benefits a registered 501c3 non-profit company. The ChIP Exchange is a qualified 501c3 transaction, under IRS code Section 1.1011-2 of the federal tax regulations (26 C.F.R. 1.1011-2) combined with an installment sale, as described in Section 453 of the code. The IRS is clear on how the transaction must work, otherwise, there is no tax deduction. The transaction is handled in escrow with our specialized and approved documentation. A registered non-profit company enters into a contractual agreement with an individual to exchange assets for a fixed cash flow that lasts a specified number of years. The receives payments, similar to a trust deed. The payments are paid directly to a person (that would be you), your company, or your trust by Hartford Life, who manages the transaction for the non profit company. The payments can be started immediately, or be deferred to a future date, earning tax deferred interest in the meantime at a rate which normally exceeds 6%.

• Q. Is there any way for me to lose money?
• No. The ChIP Exchange goes through escrow, with title insurance. Funds are wired from the non-profit company’s trust account directly to the Hartford. You will have a contractual printout guaranteeing the amount and frequency of your payments. Case histories can be found at www.the-chip-exchange.com.

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