If you have taken depreciation on an investment property, or if you have a property that has increased in value, you may face substantial capital gains taxes. Section 1031 allows you to defer the tax by exchanging the piece of property for another, provided both parcels are either used in trade or business, or held as investments. The tax-deferred exchange preserves the net proceeds. You can then reinvest the money and continue to realize returns instead of losing a significant portion of the profits to taxes.
1031 Tax-Deferred Exchange Guidelines:
- Discuss the exchange with your accountant, financial advisor, and attorney.
- When you are ready to proceed, call the Exchange Facilitator Company to gathers all of the necessary documentation from the exchanging parties, agents, and escrow officers to help you complete the exchange smoothly and efficiently.
- Be sure to include appropriate language in your sale contract. For example:"Buyer herein acknowledges it is the intention of Seller to create a 1031 tax-deferred exchange and buyers agrees to cooperate with Seller in a manner necessary to enable Seller to qualify for said exchange at no additional cost or liability to Buyer."
- Begin the search for your replacement property. Replacement property must be acquired on or before the earlier of the following dates: 1) 180 days from the date of the close of the relinquished property, or 2) the tax filing date for taxable year in which the transfer of the relinquished property occurred.
If you have any question on 1031 Tax-Deferred Exchange or have any other real estate needs, please feel free to call me at 800-221-9998x122 or email me. |
