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Posts tagged ‘tax deffered exchanges’

Aug 17

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1031 Tax Deffered Exchanges

Thanks to the “1031 Tax Deferred Exchange” real estate investors can essentially exchange investment property for a rental cottage at the beach and defer paying taxes on the realized gain until the property is sold in a subsequent taxable transaction.  The secret is knowing what type of property you may exchange, and staying within the proper time constraints.You must “identity” your replacement property within 45 days from the close of your first property and close on the replacement property within 180 days.  Sound confusing?  It’s not.  Give us a call and we’ll walk you through the process.

We even have information on a Reverse 1031 Tax Deferred Exchange (when you buy first, then sell.)  Sound complicated?  It can be – that’s why we’ll put you in touch with the expert 1031 exchangers.
The Six Basic Rules for a successful exchange are:

  1. Held for Investment – Property must be investment property – i.e. rental property, office building, apartment, vacant lot, mini-warehouse, strip mall and more. (NOT YOUR HOMESTEAD!)
  2. IRS Requires Qualified Intermediary (QI) – A professional intermediary facilitates the exchange.  (Don’t worry.  We can put you in contact with the experts).
  3. 45 Days – You have 45 days from the closing of your relinquished investment property to pick out your dream condos/home.
  4. Avoid Receipt of Sale Proceeds – You cannot accept the proceeds from the sale.  This money goes into an escrow account until you close on the replacement (new) property.  It is imperative that your hands not touch the proceeds! (unless you want the proceeds to be taxed!)
  5. Trade Equal or Up – Equal value and equity. If you buy something less in price, you will pay taxes on the portion you did not roll into the new property.
  6. 180 Days – Your new property must be closed within 180 days of the close of the relinquished property.