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Let’s say that your investment portfolio isn’t made up of just stocks, bonds, and mutual funds. Many investors choose to invest in real estate. If you’re one of those investors who hold real estate for investment purposes and you sell that real property you will be subject to capital gains taxes. Capital gains taxes can be steep, especially if you owned the property for some time and have seen it appreciate in value.
One method of deferring the capital gains taxes is to do a 1031 exchange. This is an exchange of investment property for another like-kind property without having to realize or recognize the capital gains; and therefore deferring their taxation. You cannot do this with personal residences or summer homes; the property has to be held for investment purposes.
The 1031 exchange takes its name from the part of the tax code where it is spelled out. And, as anyone who’s ever tried to read the tax code can attest, it is complicated. If you are holding an investment property you’d like to sell, but have your eye on another property or properties, it may behoove you to consider doing a 1031 exchange so that you don’t have to worry about paying capital gains taxes at this point.
As with any complicated financial transaction, this one should not be considered without the counsel of a financial expert. There are wrinkles and things to watch out for – one of such is something called boot. Boot is essentially any part of the transaction that doesn’t meet the IRS criteria as like-kind property. If you’re mostly on the right track with your exchange, but there’s a little piece of it that doesn’t qualify as like-kind property, the IRS will charge you taxes on that piece. One example of boot is cash paid out to equalize the exchange.
It’s true that 1031 exchanges can be a boon for real estate investors, allowing them to defer capital gains taxes until they decide to divest from their real estate empires. This strategy does have a lot of complexity to it, though, such as specific timeframes, methods of transaction closings, Qualified Intermediaries, boot, and escrow considerations. Do not try this strategy without consulting an expert.
What else can I help you with?
Where can one find 1031 exchange properties?
There are many ways one can use a 1031 exchange. If one seeks more information on the 1031 exchange process and 1031 exchange properties, one might consult a Forbes professional.
Can I do a 1031 exchange on my primary residence?
No, a 1031 exchange is typically used for investment properties, not primary residences.
Can you 1031 exchange your primary residence?
No, a 1031 exchange is typically used for investment properties, not primary residences.
What is the duration of the 1031 exchange identification period?
The duration of the 1031 exchange identification period is 45 days.
Do you have to enroll to receive 1031 exchange?
No you do not. You must make a transaction with the Internal Revenue Service to receive the 1031 exchange.
Can I use a 1031 exchange for my primary residence?
No, a 1031 exchange can only be used for investment or business properties, not for a primary residence.
What are 1031 Exchange properties?
1031 Exchange properties are properties meant for exchange. The concept can be related, or though of, as a Timeshare, though it obviously has its varying, and unique, differences.
What is a 1031 real estate exchange about?
The 1031 real estate exchange allows the investor to sell property, and reinvest the processed into another property. The 1031 real estate exchange protects investors against the capitol gain taxes.
Where online can one learn about Section 1031 exchange?
One can learn about the Section 1031 exchange online on sites such as 1031exc and 1031 exchange advantage. One can also get more information at places like H&R Block.
Can I use a 1031 exchange to buy my primary residence?
No, a 1031 exchange cannot be used to buy a primary residence. It is specifically for investment or business properties.
Where can one find information on 1031 property exchange?
One can find information on 1031 property exchange on various websites like 1031 and expert1031. Both websites offer a great amount of information regarding this subject.
Do you have any 1031 Exchange Semminars in the area if so I would like to assit. Thank you. Javier Santis?
Sorry,I don't have any 1031 Exchange Semminars.
