Guru of Exchange

This article originally appeared in the Pasadena Star News on July 31, 2006.

Phillips aids in real estate transactions
By Kevin Smith Staff Writer

C. Anthony Phillips knows a thing or two about real estate exchange. And his expertise in the field has propelled him to become a nationwide authority on the practice. Working through his Pasadena-based business, Downstream Exchange Co., Phillips has helped scores of clients avoid paying taxes in real estate transactions.

C. Anthony Phillips, CPA, President, of Downstream Exchange Company and owner of Phillips & Company.

"We deal with investment properties, principally real estate," the 64-year-old Pasadena resident explained. "You can sell a piece of investment property and acquire another piece of investment property, and if you follow the rules and regulations of Internal Revenue Code Section 1031 ... you pay no tax."

And that equates to saving money.

In 1986, the nation's tax laws were changed, which bumped the capital gains tax from 20percent. The rate has since dropped to 15percent.

"The U.S. government's perception is that if you lower the capital gains rate, you'll have more transactions, and that will stimulate commerce," Phillips said. "But what they didn't do was lower the recapture rate on depreciation."

Real estate exchanges make plenty of sense. But it does take some finesse to execute one.

"The IRS doesn't make it easy to do the 1031 - there are a whole series of hurdles you have to get over and things you have to do," said Phillips, who also is a partner in the certified public accounting firm of Phillips & Co. "It's very complex. Since it is an Internal Revenue code section, you really need someone who understands how to do this."

Phillips serves as the "accommodator," or someone who facilitates a real estate exchange.

The most common type of exchange is a delayed exchange using an accommodator. When the relinquished property is transferred to the buyer, the exchangor may not know what property they want to acquire. If the exchangor cannot acquire the replacement property on the same day they sell the relinquished property, then the exchangor needs an accommodator.

Judy Pastor, who manages the escrow division at Huntington Escrow in Pasadena, said Phillips' service has been invaluable for her clients.

"He's my guru of exchange," she said. "He's wonderful. Besides being so knowledgeable in his area, he's very responsible and doesn't misguide people. And he's got ethics like you wouldn't believe!"

Born in Philadelphia, Phillips attended Drexel University, where he received a bachelor's degree in business administration with an emphasis in accounting before going to work for Haskins & Sells, an international accounting firm based in New York.

Phillips moved to California in 1964, later receiving a master's degree in business administration in finance from USC. He also earned a master's in business taxation.

Phillips bought the accounting firm of Zazueta & Osterhaut in 1973 and changed the name to Phillips & Co.

Downstream Exchange Co. was founded in 1979. The company was formed, in part, because more and more Phillips & Co. clients were inquiring about real estate exchanges.

"I have so much fun in a day," Phillips said. "It's just sinful to come to work and have so much fun. The people I work with are great - the attorneys, the CPAs ... they are all bright, knowledgeable people."

Most of all, Phillips says he's happy to help clients save money.

"You can't believe it," he said. "People come in owing hundreds of thousands of dollars in taxes. But when you explain what they have to do they say, `I can do that.' People call up and thank us profusely for saving them a substantial amount of money."

Phillips is in high demand as a speaker in his industry, appearing at conferences and seminars across the country.