When a person sells or disposes of property, a gain or loss is recognized for tax purposes. This gain or loss results in federal income tax consequences in the year the property changes hands. For an instance, if an apartment with a value of $90,0000 is sold for $1,50,000 in cash, the gain of $60,000 is considered to be the owner’s income. Now, the owner has to pay federal income tax on that gain.
According to Section 1031 of the Internal Revenue Code, there is an exception to the above-mentioned rule that makes a certain exchange of property not immediately taxable. These exchanges are generally referred to as ‘Starker Exchanges’, ‘1031 Exchange’ or ‘Like-kind’ Exchanges. When is the right time for 1031 Farming? When you sell an investment property, you end up paying the capital gain tax. If you have made some bad investments, then selling your property might cost you more than you have gained. However, if you own a rental property that is valued more than what you have purchased it for, then you can make a good amount using this powerful strategy. How to use this strategy now? To use this strategy, you have to exchange one property for another of the same value. In the process of exchange, you have to skip capital gains, at least for a while. Eventually, it is easy for an investor to cash out and pay taxes, however, meanwhile, an investor can trade the properties easily without incurring a sudden tax obligation. It is an essential tool for the real estate investors as it is a bulls-eye for tax reform evangelists. According to the exchange rule, the purchase price and the new loan amount should be the same or higher on the replacement property. For instance, if an investor were selling $1,00,000 property that had a loan of $50,000, then they would have to buy a $1,00,000 or more of replacement property with $50,000 or more leverage. conclusion 1031 exchange is thus one of the best ways of settling down the non-income producing real estate investment for a much superior property that can easily help you gain some cash and income flow in return. One can even go for 1031 exchange from property to land depending upon the value of the property one possesses and the land one wants to acquire. The exchange is also beneficial for the people who have been holding different types of properties for long and don’t have much value for them, they can simply be disposed off and help them to acquire different new property that could be of much value for the investor. 1031 exchange is also an amazing deal for those who own properties that may be located in the areas of not much value of now and can be traded with those that are in better location. It is one of the most smartest strategies of exchanging your property without the hassle of paying taxes and with proper planning one can gain a lot too.
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1031 Exchange allows the investors money to get the maximum profit for exchange properties. However, the exchange process involved is extremely complex in nature, and it would be good if we have guidance from expert professionals. Our expert team has extensive experience in handling the highly profitable exchange of property for our varied client base. A 1031 exchange properties type may include any properties like industrial properties, office buildings, storage facilities, single-family homes, raw lands, multi-family apartments, retail shopping centers, and triple net leases. 1031 exchanges are the tax-deferred exchanges that enable the investors to defer the capital gain taxes on the exchange of like-kind properties. The term ‘like-kind’ here means that the properties that are of similar nature. The mandatory condition for the properties used under 1031 exchange is that they should be used for some productive use or some investment and business purposes. Not to mention, But an investor can’t exchange the primary residence under the 1031 exchange. One more requirement of 1031 exchange properties is that the involvement of a qualified intermediary. Therefore if the investor is planning to complete his/her 1031 exchange by himself, then he should stop thinking because the chances are insignificant. We can say this is a miracle; after all, more qualified and experienced and qualified per0son will be handling the exchange. The following list of 1031 exchange property types is an excellent place to start when thinking what your next step will be when you sell your relinquished property:
1031 exchange allows the investor to get the maximum gain from the 1031 exchange properties. However, the exchange process is quite difficult, and it would be useful for the investor if he takes guidance from expert professionals. We have extensively experienced team in handling a highly profitable exchange of property for our diverse client base. The properties that are involved in the 1031 exchange are office buildings, storage facilities, industrial properties, single-family homes, multi-family apartments, raw lands, retail shopping centers, and triple net leases. There are certain pre-requirements for acquiring and identifying potential like-kind property or 1031 replacement properties in your 1031 exchange. Replacement property that you want to purchase for 1031 exchange should be determined to your Accommodator and must be identified within the 45th day of the calendar following the end of your relinquished property sale transition. Let’s discuss an example to explain this: If the sale of the property of the investor closes on August 31, then the first day of 45 day calendar identification period would be September 1, and the 45th calendar day would be October 15. For this, an investor must follow at least one of the following identification rules when completing the identification of like-kind replacement properties. One more requirement for completing a 1031 exchange is that the investor must involve qualified intermediaries. So, if the investor is thinking to achieve the 1031 Exchange by himself, then he should stop bothering because the chances are negligible. We can say this is a miracle after all more experienced and qualified personnel will be handling your exchange. Qualified Intermediaries are the person who is responsible for the exchange. Without the involvement of Qualified Intermediary, also known as QI, an investor cannot complete1031 exchange. If the investor wants to complete the 1031 Exchange by himself, then it is not possible, as Qualified Intermediary is the heart of the 1031 exchange, and we can't imagine an exchange without them. The exchange process starts with the sale of the relinquished property. For this purpose, the investors require the help of Qualified Intermediary as he owns the proceeds in an appropriate type of account known as Escrow account because the investors are not permitted to touch the proceeds. As we already know, there is a deadline of 45 days for the identification of the replacement property. These 45 days is known as the identification period. Suppose if the investor does not meet either the deadline and couldn’t complete the exchange within 180 days, then the property exchange will not be listed for 1031 exchange. Since time plays an important role, and the involvement of Qualified Intermediary becomes a more important part of 1031 exchange properties. 1031 exchange enables the investor to get the maximum profit from the 1031 exchange properties. However, the exchange process is quite complex in nature and it would be good for the investor if he takes guidance from expert professionals. We have extensive experienced team in handling highly profitable exchange of property for our varied client base.
The properties that are included in 1031 exchange are office buildings, storage facilities, industrial properties, single family homes, multi family apartments, raw lands, retail shopping centers, and triple net leases. There are certain pre requirements for identifying and acquiring potential like-kind replacement properties in your 1031 exchange. Replacement property that you want to acquire for 1031 exchange should be identified to your Qualified Intermediary (also known as accommodator) and must be distinguished no later than midnight of the 45th calendar day following the end of your relinquished property sale transition. Let’s take an example to explain this: If the sale of the first property of the investor closes on May 31, then the first day of 45 day calendar identification period would be June 1 and the 45th calendar day would be July 15th. For this you must follow atleast one of the following identification rules when completing the identification of your like-kind replacement properties. One more requirement for completing 1031 exchange is the investor must involve qualified intermediaries. So, if the investor is thinking to complete the 1031 exchange by himself, then he should stop bothering because the chances are negligible. We can say this is a miracle, after all more experienced and qualified person will be handling your exchange. 1031 exchange is not possible without the involvement of Qualified Intermediary, as he is the person responsible for the exchange. It is not possible for the investor to complete the exchange by himself as Qualified Intermediary is the soul of 1031 exchange and we can’t imagine an exchange without them. The process for the exchange starts with the sale of relinquished property. For this purpose the investors need the help of Qualified Intermediary as he holds the proceeds because the investors are not allowed to touch the proceeds. As already discussed there is a deadline of 45 days to identify the replacement property. This 45 days time period is known as identification period. Suppose if the investor does not meet either the deadline and couldn’t complete the exchange within 180 days, then the property exchange will not be listed for 1031 exchange. Since time plays important role, and the involvement of Qualified Intermediary becomes more important part for 1031 exchange properties. For consultation and assistance regarding 1031 exchange call - 888-876-6005 or email us at [email protected] |
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