1031 Exchange - The intelligent way for real estate buyers to
defer capital gain taxes.
Section 1031 of the Internal Revenue Code (IRC)
offers real estate buyers a golden opportunity by means of
significant tax advantage. Section 1031 of the IRC gives a chance to
real estate buyers to defer the capital gain taxes that they incur
by selling a property. It states, a real property owner can sell his
property and then reinvest the proceeds to purchase of like-kind
property and defer the capital gain taxes. However, to qualify for
1031 like kind property exchange
aka, 1031 tax deferred
exchange and gain tax benefits, the transaction has to be done
in accordance to the 1031 exchange rules set forth in the tax code
and the treasury regulations. Like-kind exchange is considered as
one of the best-kept secrets of the Internal Revenue Code.
Yes, if you have a real property that will get
you a profit on sale (may be due to property value depreciating for
tax purposes or due to appreciation of real estate in fair market
value) then you are the ideal person to go in for a 1031 real estate
exchange. Section 1031 of the IRC applies to “Property used in
taxpayer's trade or business”, “Property held for investment”
and also potentially for “Property used as a vacation home.” In
normal circumstances, the exchange can take the form of a direct
interchange or the taxpayer may take assistance from a Qualified
Intermediary to hold the sale proceeds until the taxpayer directs
the Qualified Intermediary to use them to acquire like-kind
replacement property. Completing a qualified exchange keeps you in
the real estate business and may preserve your capital gains as far
as the IRS is concerned.
Under Internal Revenue Code Section 1031,
generally no gain or loss is recognized when you exchange business
or investment property exclusively for business or investment
property of a like-kind. In a like-kind exchange, properties are
believed to be of a like-kind if the property acquired is alike in
nature and situated in the United States. However, real property in
the United States and real property outside the United States are
not considered as like-kind properties. Some common examples of 1031
like-kind exchange property include apartments, commercial, condos,
duplexes, raw land and rental homes. Although Section 1031 is not
applicable to exchanges of inventory, stocks, bonds, notes, other
securities or evidence of indebtedness, or on certain other assets.
- Apartment building for farm/ranch
- Office building for hotel
- Raw land for retail space
- Unimproved property for commercial property
Personal properties of a like class are also
considered as like-kind properties. Regardless of whether the
properties are improved or unimproved, real properties generally are
of like-kind. But, livestock of different sexes are not like-kind
properties. In a 1031 Like-Kind exchange you can exchange any real
property for any other real property within the United States or its
possessions if said properties are held for productive use in trade
or business or for investment purposes.
I can assist you in building your equity faster
by performing a 1031 exchange instead of completing a traditional
sale for your investment property. I can provide comprehensive facts
about 1031 tax deferred exchange, the role of a Qualified
Intermediary or Exchange Accommodator, 1031
Tenants In Common Exchange and 1031 Triple Net Lease Exchange.
There are literally thousands of variations
possible in a 1031 Exchange or Starker Exchange. I will be glad to
consult with you at any time without charge and provide solutions to
your queries about any aspect of 1031 exchange. I can help you
determine the most appropriate investment strategy for your real
estate portfolio. I can give you a complete step-by-step guide on
setting up your 1031 property exchange and also provide latest
information and opportunities related to the 1031 exchange.
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David A. Wolffis PLLC ABR, Realtor® 
