 Lots of people have heard of a 1031 Exchange, but few
people understand them. I suggest you always consult with an
attorney prior to attempting a 1031 exchange. So what are
they?
The Internal Revenue Service will force you to pay
capital gains taxes on investment property if you make a
profit on it the year you sell it. Section 1031 of the
Internal Revenue Code allows you to
defer paying
those taxes. This means, if you re-invest the profit from
your investment property into another property, you can
defer or delay paying the capital gains taxes on the
original property.
So how long can you defer them? It depends on how many
exchanges you do, or when you sell the next investment
property. 1031 exchanges are used when your profit is
significant in an investment property. Instead of paying
those 15% capital gains taxes on the profit, you roll that
money into a new investment property.
It is a little more complicated that just that, but you
hopefully get the idea. There are numerous requirements as
to timing, forms, property designations etc., to doing an
exchange properly. If you foul up just one of these
deadlines, you have to pay the capital gains taxes, so it is
essential that you obey the rules of the exchanges and
consult an attorney BEFORE you decide to sell your
investment property.
My role in 1031 exchanges is as follows: I will represent
you by being your Buyer’s agent for the new investment
property you will ultimately purchase. The beauty of this is
that there is a very stringent 45 day limit on properties
that you identify after you sell your original investment
property. As your agent, I can access all available
properties to ensure compliance with this requirement.
Further, you must plan ahead with the sale of your original
property. The closing monies of the original property must
go through a qualified intermediary, or you cannot take
advantage of the exchange. I take care of this for you, as
well as everything else to ensure a smooth exchange.
With investment properties becoming an amazing wealth
builder, you are throwing money away if you do not perform a
1031 exchange. Unfortunately, the unrepresented people often
suffer extreme tax consequences for nothing.
These and multiple other issues can be discussed at
length for those interested. This is a great way to continue
to profit in investment properties while deferring the
payment of capital gains taxes. I suggest contacting me
BEFORE you are ready to sell your investment property to
ensure a smooth transaction. Click on the Contact me link
for a free consultation and more information.
|
