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1031 Exchange is a tax strategy used by real estate investors to defer paying capital gains taxes when disposing off investment property. 1031 stands for the section of the internal revenue code that allows for tax deferred dispositions. Exchange stands for the requirement that investors must exchange into replacement investment property after disposing off their relinquished property.
The proceeds received from the sale of the relinquished investment property must not be received by the investor owner. The proceeds must be received and held by a qualified intermediary and must be used to acquire replacement investment property. The investor must complete the exchange during a legally mandated exchange timeline. As soon as the investor has made a decision to pursue a 1031 exchange it is important to consult with a professional who specializes in 1031 exchange strategies and compliance issues. It is important to disclose to the realtor as well as all parties concerned, that the sale or purchase of properties is a 1031 exchange.
As your Realtor I can help you with the sale of your investment property as well as the purchase of the replacement property and also refer you to qualified exchange professionals. Since a 1031 exchange must be carefully constructed to align with all applicable guidelines within the comprehensive IRS tax code always interview the professional to see if you feel confident he/she can handle all aspects of the exchange for you including the role of a qualified intermediary.
Disclaimer: Before initiating an exchange it is strongly suggested that you also consult a tax and /or legal advisor to determine whether exchanging will be compatible with investment objectives. |
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