The '1031 Exchange' is a tax-break from the IRS that allows real estate investors to sell their investment property without paying capital gains taxes.
Necessary forms to complete include IRS Form 8824, 2797, and 6252.
A related party is but is not limited to, immediate family members, such as brothers, sisters, spouses, ancestors, and lineal descendants. A corporation, limited liability company, or partnership in which more than 50% of the stock, membership interests, or partnership interests, or more than 50% of the capital interest or profits interest owned by the taxpayer is also considered to be a related party.
There are no actual holding rules given by the IRS. Many tax advisors advise that the property be held at least 12 months prior to the exchange. The amount of time the property is held is not the only thing the IRS looks at when determining the validity of a 1031 Exchange. Another important factor is the intent to hold the property for business or investment use.
The IRS states that identification must be in writing, signed by you, and delivered to a person involved in the exchange like the qualified intermediary.
Yes, you can buy a new property before selling the old property and still qualify. This is called a "reverse" exchange. The qualified intermediary takes title to the new property you buy and holds it for you until you sell your old property.
Almost every kind of real estate is considered "like-kind" and can be exchanged for any other real estate, including vacant land for apartments, a rental house for a shopping center, an office building for a leasehold interest with 30 years or more remaining, as long as you hold them for investment or business use.
Yes, there are many non-tax reasons to exchange.
You can eliminate paying any capital gains taxes, and you can eliminate paying the even higher-rate taxes on the recapture of depreciation you've taken on your property. By exchanging into a higher priced property you'll also gain additional depreciation deductions which can increase your after-tax income.
es, you can. By simply following the 1031 exchange rules every time you sell an investment property, your estate escapes all the capital gains taxes forever after you pass away!
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Plenti Financial™ is a trade name of 1031 Exchange Advantage®. 1031 Exchange Advantage™ is a trade name of 1031 EA, LLC and is not a licensed broker. 1031 EA, LLC is a division of Plenti Financial and is the accommodator for a 1031 Exchange as required by the IRS. 1031 EA, LLC does not provide, brokerage, legal or accounting services and is simply a Qualified Intermediary under the IRS code. It therefore is not providing any services other than accommodation services and clients and prospects are advised to confirm all tax, legal, accounting and real estate investment decisions with their professionals such as their accountant or attorney.
A 1031 exchange is a method of tax deferral upon the sale of investment real estate. However, the decision to pay or not pay accumulated and/or deferred taxes is up to the taxpayer, who has control over whether transactions are completed tax-deferred, or tax-free! If an exchanger should decide to continue exchanging into investment property of same or greater value for life, and never sell investment property without utilizing a 1031 exchange, no taxes would be due on any transactions, making them tax-free! Even in the event the taxpayer dies, the taxes die with him, again making the transactions tax-free! Because the choice is up to the taxpayer, we like to say taxes in an exchange are deferred, unless you choose to sell tax-free with Plenti Financial!
