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What is a 1031 exchange?
Below is some basic information on the purpose and advantages of using a 1031 exchange when selling investment type properties.
I have also included a link to Spectrus Real Estate Group, an innovative company that specializes in 1031 exchanges and the reinvestment of exchange proceeds. This is a great alternative for investors that are tired of the day to day management of rental and investment properties but want to keep their money invested in real estate and avoid paying capital gains. This is program allows a Seattle investor to take profits from the hot Seattle market and re-invest them in other areas of the country where prices have corrected and there is potential for excellent return on investment. I encourage you to follow the link and read more about this excellent investment strategy.
http://www.spectrusgroup.com/
Tax deferral through 1031 Exchanges offers a means to preserve wealth that you have worked so hard to accumulate and grow your assets by re-investing the tax savings. In a typical Forward Delayed Exchange, the most common type of exchange, the taxpayer sells business or investment property and acquires Replacement Property of equal or greater value within 180 days.
Keys to a Successful Exchange
Investment Intent
Both the property sold (Relinquished Property) and the property purchased (Replacement Property) must be held for investment or productive use in a trade or business. None of the properties exchanged can be your personal residence.
Time Frames
Replacement Property(ies) must be identified within 45 days of the sale of the Relinquished Property and must be purchased within 180 days of the sale of the Relinquished Property.
Like-Kind
The Replacement Property must be "Like-Kind" to the Relinquished Property. Any type of real property is Like-Kind to other real property. For example, a shopping center is like-kind to an investment condominium and a warehouse is like-kind to raw land.
Property Value
You must purchase a property of equal or greater value to the property sold or pay tax on the difference.
Identification
You can identify up to three Replacement Properties of any value during the Identification Period, or more, subject to certain conditions.
Common Ownership
The party selling the Relinquished Property must be the same party purchasing the Replacement Property or a disregarded entity with respect to that party.
Exchange Values
You must use all of the cash proceeds from the sale of your Relinquished Property toward the purchase of Replacement Property or pay tax on the difference. If you offer seller financing on your Relinquished Property you may be subject to tax as the principal is repaid.
Qualified Intermediary
To qualify for safe harbor tax deferral, sale proceeds must be held by a Qualified Intermediary between the sale of the Relinquished Property and the purchase of the Replacement Property. |
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