Tips to Benefit from the 1031 Exchange?

Section 1031 of the U.S. Internal Revenue Code often referred as the 1031 Exchange allows a property owner to avoid paying capital gains taxes while selling an investment property to buy another like-kind property. As an investor, 1031 Exchange can interest you in more than one way, some of which are listed below:

• 100% Capital Gains Taxes on the sale of property are waived.
• You can acquire a more valuable investment property.
• You can consolidate your various properties into one anywhere within the United States.
• You can also diversify your single property into several assets across one or more cities.
• Your purchasing power as an investor is increased and your cash flow improves
• You gain potential for geographic relocation.
• Managing a property can be tough, you can sell such a property to invest in a managed property option.

What type of property can be sold and bought under the scheme?

The IRS Code Section 1031 gives an investor the option to defer capital gains tax only by reinvesting the proceeds from the sale of an investment property into a qualified replacement property. Some points to keep in mind before choosing properties under 1031 Exchange include:

• The 1031 exchange investment property needs to be held for productive use only, such as in trade or commerce for income creation or investment purpose.
• Like-kind property does not mean characteristics like the quality or grade of a property, but is a reference to its nature or characteristics. That means you can exchange a commercial building for barren land, but cannot buy a car or plane with it.
• Property under this scheme cannot be bought for personal use or for resale. A minimum of two-year ownership is required before reselling a property.
• The replacement property must be identified within 45 days from the sale and the exchange must be completed within 180 days.
• Proceeds of the sale can only be reinvested in a property or properties of like kind with total value equal or greater than the relinquished property.
• If the replacement property is of lesser value than the relinquished property the difference in the prices is taxable.

Who can help you benefit from the 1031 Exchange?

Any income that has been created through the sale of a property remains taxable under the law. For benefitting from the 1031 Exchange, the proceeds from the sale are held by a qualified intermediary, i.e. 1031 exchange tax specialist rather than the seller of the property. The person or company acting as the intermediary holds on to the money till a replacement property or properties have been found and transfers the funds into the seller of the replacement property. This intermediary and the two parties exchanging properties can have no other formal relationship with one another. 1031exchangespecialist.com connect a wide range of sellers and provide them with 1031 exchange qualified NNN, TIC, and DST property information. You can contact us online at 1031xchange.com to make an appointment with us or mail us info@1031xchange.com, or call us at 1-888-993-2835.