IRS Reporting
Necessary forms to complete include IRS Form 8824, 2797, and 6252.
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Related Party
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.
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Identification Rules
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.
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What kind of real estate qualifies for a 1031 exchange?
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.
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Are there reasons to exchange rather than tax advantages?
Yes, there are many non-tax reasons to exchange.
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What exactly are the tax advantages in exchanging?
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.
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Can I avoid paying taxes forever?
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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How can I qualify to pay NO taxes when I sell my property?
As long as your property has been used for investment, you can qualify! Section 1031 of the IRS code lets you sell your property and buy a new property without paying any taxes if you simply follow the specific rules.
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What is a qualified intermediary?
Between the sale and purchase, a qualified intermediary holds the proceeds of the sale of the relinquished property, prepared the legal documents and ensures that the entire process is completed within the IRS guidelines.
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Why is an accommodator needed?
Per IRS rules and regulations, the taxpayer may not receive the proceeds or take constructive receipt of the funds in any way, without disqualifying the exchange.
