Real estate firm's collapse worries investors

The San Jose Mercury reports:

Millions of dollars in real estate investors' money has apparently disappeared with the collapse of a firm that helped investors in Silicon Valley and elsewhere buy and sell property and defer paying capital gains taxes.

1031 Tax Group of Richmond, Va., which operated in San Jose as 1031 Advance, filed for bankruptcy in New York City over the weekend. But even before then, it had become the subject of investigations by the U.S. Postal Service and U.S. Attorney's Office in Virginia.

The company specialized in an increasingly popular property transaction known as a "1031 exchange," in which the role of intermediaries such as 1031 Tax Group are not regulated.

The firm's bankruptcy filing lists huge creditors, including a couple from Los Altos who trusted the company with $10.6 million, and a Portola Valley woman who handed over $3.3 million.

"I was depending on this income to live off. This has entirely changed my life," said Candace Graham, 58, of Portola Valley.

The kind of story you hear in a declining market.