|
| |
1031 Exchange | 1031 Exchange
Tax | 1031 Exchange Property | 1031Exchangecom
|
A 1031Exchange
is similar to a traditional IRA or 401K retirement plan.
|
Section
1031 Exchange
A 1031 property exchange is an
effective way to defer paying taxes that would otherwise have been due
on the first sale. For example - an investor bought a commercial
property, a strip mall, for $200,000. After 6 years he sells the
property for $250,000.
This results in a gain of $50,000 and the investor would have to pay
capital gains tax on this amount. However if he invests the $250,000 in
another commercial real estate (like kind - does not have to be a strip
mall), then he does not have to pay any taxes now i.e he defers his
taxes till a later date. |
 |
|
A 1031 Exchange is similar to a traditional IRA or 401K
retirement plan. When someone sells assets in tax-deferred retirement
plans, the capital gains that would otherwise be taxable are deferred
until they begin to cash out of the retirement plan. |
|
|
| The same
principal holds true for tax-deferred 1031 exchanges or real
estate investments. As long as the money continues to be re-invested in
other real estate, the capital gains taxes can be deferred. Unlike the
aforementioned retirement accounts, rental income on real estate
investments will continue to be taxed as net income is realized.
Frequently
the most difficult component of a 1031 Exchange is identifying
replacement property within the first 45 days following the sale of the
relinquished property. The IRS is very strict in not allowing
extensions. The only way to extend your 45 days is on the front end, and
that is done by carefully thinking about your replacement property
alternatives before you close on the sale of your relinquished property.
Banks and
Banking Facts
Once an investor has
decided to pursue a 1031 Exchange,
the process is fairly straightforward
and will be carefully facilitated by a Qualified intermediary. It is
suggested that you contact a QI as soon as the exchange decision has
been made. Here is a typical timeline involving an exchange, presented
in the traditional order of occurrence.
-
Investor
decides to sell investment property and do an exchange. Investor
contacts a QI.
-
Investment
property is put on the market.
-
Offer to
purchase investment property is accepted.
-
Escrow for
the sale is opened and preliminary title report produced.
-
The QI
sends required exchange documents to escrow closer for signing at
property closing.
-
Escrow
closes.
-
Within the
first 45 days after the close of escrow on the sale of the
relinquished property, investor identifies replacement property as
required by law.
-
Within 180
after the close of escrow on the sale of the relinquished property,
investor closes on replacement property that was identified by them.
The exchange is completed.
|
|
|
|
|
| 1031
EXCHANGE NEWS |
|
The URL you supplied is either not RSS or the site is down at this time. Please check the feed URL or refresh the page. | |
|
