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We specialize in assisting both buyers and sellers in successfully completing 1031 tax deferred exchanges. Our national scope can be utilized by you to both find properties to buy, or find buyers for a property you wish to sell. Please contact us if you want to take the worry out of successfully completing a 1031 Exchange.
According to the Internal Revenue Service: Generally, if you exchange business or investment
property solely for business or investment property of a like kind, no gain or loss is recognized
under Internal Revenue Code Section 1031. If, as part of the exchange, you also receive other
(not like-kind) property or money, gain is recognized to the extent of the other property and money
received, but a loss is not recognized.
Section 1031 does not apply to exchanges of inventory, stocks, bonds, notes other securities or
evidence of indebtedness, or certain other assets.
Like-Kind Property:
Properties are of like kind if they are of the same nature or character, even if they differ
in grade or quality.
Examples of like-kind properties
- Raw Land
- Apartments
- Duplexes
- Commercial
- Industrial
Investment/Business Properties exchanged can be of different values and there can be
multiple property transactions performed in one exchange.
1031 Exchange Requirements:
- Both the property that is sold and purchased under the exchange must be held for solely for investment or business purposes.
- Both the property that is sold and purchased under the exchange must be of like-kind.
- A qualified intermediary and a qualified escrow agent must be used. (This is usually a title company)
- Must use the appropriate 1031 exchange documents.
- Must meet the appropriate timeline requirements. The timelines are very strict and must be adhered to.
1031 Timelines:
- Must identify replacement property/properties within 45 days of selling your investment/business property.
Identifying alternative and multiple properties:
You can identify more than one replacement property. Regardless of the number of properties you give up, the maximum number of replacement properties you can identify is the larger of the following.
Three.
Any number of properties whose total fair market value (FMV) at the end of the identification period is not more than double the total fair market value, on the date of transfer, of all properties you give up.
If, as of the end of the identification period, you have identified more properties than permitted under this rule, the only property that will be considered identified is:
Any replacement property you received before the end of the identification period, and
Any replacement property identified before the end of the identification period and received before the end of the receipt period, but only if the fair market value of the property is at least 95% of the total fair market value of all identified replacement properties. (Do not include any you canceled.) Fair market value is determined on the earlier of the date you received the property or the last day of the receipt period.
Must close on replacement property within 180 days or tax return date.
The information above is not to be construed as legal or tax advice. It is highly recommended
that you consult your attorney and tax advisors for the most up to date information on 1031 exchanges.
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