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Question 1: I serve on a non-profit board that is selling some real estate. The buyer's attorney is saying that we have to amend our articles of incorporation because they say that we have "members." It is true that this is how our articles read. But, as a practical matter, we have never had members, just a board of directors. Why do we have to amend our articles? Why can't we just authorize a board member to sign with a corporate resolution?
Answer: A corporation is a juridical entity. It is its own person so to speak with its own identity. It is created and empowered by its articles. If the articles of incorporation say that the corporation has members, then it legally has members whether if it actually does or not. So, in those organizations that actually do have members (like a church for example) then a quorum of voting members would have to be present at an authorized meeting and actually vote in order for the organization to sell land. In this case, we agree that the simplest thing to do is to amend the articles to say that any reference to members was a mistake and that the corporation has never had members. It's a good idea to propose a draft of your final documents to the closing attorney in advance so that he or she can preview same and approve same before you go the trouble to execute and record it.
Question: I'm thinking about selling some land and then taking the money and putting it to a new house. A friend of mine keeps telling me that if I do a "1031" exchange, then I will not have to pay a capital gains tax. Is he right?
Answer: Maybe. Section 1031 of the Internal Revenue Code allows a taxpayer to exchange property that is held for use in a trade or business for the production of income with "like kind" property, and avoid a taxable gain. These sorts of exchanges work well when a real estate investor has a rent house, wants to sell it, and also plans to buy new property in the near future. When this happens, the seller, instead of receiving the sale proceeds, instead turns them over to a third party escrow agent. The third party escrow agent holds the money until such time as the seller is ready to use them to buy a like kind house. This way, the sale proceeds never come under the control fo the seller. Accordingly, when the seller uses the money to buy a new property, then the seller will never have to touch the proceeds. This way, the seller avoids a capital gain tax. These are commonly known as "1031 exchanges." They are somewhat complex and they have many restrictors. The viewer should consult a knowledgeable real estate professional before acting.
Question: I need to have a succession done. I heard that it's a whole lot cheaper to do a small succession. Is that right?
Answer: Maybe. Code of Civ. Proc. Art. 3421 defines a small succession as the succession or the ancillary succession of a person who at any time has died and the decedent's property in Louisiana has a gross value of one hundred twenty-five thousand dollars or less valued as of the date of death.
Disclaimer: The information furnished in this answer is general and may not apply to some situations. All legal situations are unique. No one should rely to their detriment on these answers. Anyone with a potential legal problem should seek the advice of a licensed attorney before taking any action or inaction. The answers provided are not intended to be specific legal advice and no attorney-client relationship is created between the SWLA Law Center and the viewers of KPLC-TV.