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Speak with a qualified 1031 intermediary. Every situation is different.
Tony and Suzanne Marri...
I assume you are talking about a 1031 exchange. If it ISN'T a like kind exchange, per the IRS rules, you could get hit with some pretty hefty taxes. I'd consult with a 1031 exchange company to understand the pros and cons and what qualifies
Kathleen Daniels, Prob...
San Jose, CA
Les & Sarah Oswald
Are you referring a 1031 Exchange? If so this will only apply to investment properties. Primary residence are not allowed. If this is an investment, then it will delay you paying capital gains. Normally you must pick out the new property within 45 days of sale. This is becoming more popular in recent years,so if this applies to you,then do it. I would use a 1031 exchange company,for there are time constraints involved. I believe you must close within 6 months of identifying your new property. As a Mortgage Banker I have done several of these deals, and all use a 1031 Exchange Company. Good luck........Joe
Candice A. Donofrio nailed this one!
Candice A. Donofrio
Fort Mohave, AZ
As Candice A. Donofrio suggested, speak with a qualified intermediary.
Candice A. Donofrio
Fort Mohave, AZ
You can delay paying capital gains taxes, and there are real estate lawyers who can help you mkae one happen. They're complicated enough to be above our pay grades.
The 1031 can be a geat tool. It is best to call a qualified exchange company.
I would suggesst Starker services. I think the main office is in California
This would be a good question for an attorney and tax professional.
It is used to delay paying taxes and as Nina Hollander says still stay in the Real Estate game. Keep trading up and in the end, when you have had enough, pull out, pay-up and move on....
I suggest taking a class in it before you take the plunge to do it or represent it.
You have received fabulous answers. Talk to you accountant, or financial adviser. A
1031 I assume. What's not to know? I think it's a great way to offset your equity from taxes & still stay in the real estate business. You have to do it absolutely correctly though or you'll get whacked pretty fast with taxes.
I've never done one. Though I have assisted with 1031 exchanges.
For you or your client? There are tax benefits reasons, so I'd suggest to speak to your CPA.
I recently closed a 1031, and the client sold the rental property in a different state, and bought another here, that was a bit more, so no issue with touching any of the money.
What Jeff Dowler said. I always use a qualified 1031 intermediary.
Ask your accountant or attorney! Use a good qualified exchange company!!
consult with an attorney and/or CPA....
Best answered by a cpa or tax attorney.
Talk to your accountant.
You will know if its right when you pay your tax bill! The only con is that you still own property. The pro is that you avoid taxes today, and the definition of "like kind" is very broad.
Are you talking about 1031 Exchanges? At the end of the day, I suggest you do this with assistance of specialists.
Coal Infantino - a good question on behalf of investors for sure.
And many good answers here.
The last I heard, darn near anything could be considered "like kind" from commercial buildings to certain types of mutual funds! Just work with a good facilitator and accountant. They'll be worth the $$ they cost!
If you want to keep your hard-earned money away from Uncle Sam, this is the best legal tax avoidance route to take.
Seek professional accounting, tax and legal advice applicable to your jurisdiction(s).
Jeff Dowler has an excellent answer.
Contact a tax advisor to be sure you have qualifying properties and if it will help save money for now by deferring the tax consequences.
Coal Infantino If you have any investments, it is right for you. Major pro is deferred taxes.
Coal ~ The old adage is defer, defer, defer, die... best way to minimize taxes on a property since the heirs get the stepped up cost basis.
A 1031, Like Kind, Starker or Reverse Starker are all names of an IRS recognized exchange that does not trigger a tax payment. If you have a property to sell and are looking to buy new property it is great. As I remember it, you could exchange a motel for timber land or a single family home for a strip mall, but the dollar amount purchased has to at least match the dollar amount sold. Just about any real estate can be exchanged for any other real estate, but a 1031 specifically excludes personal property.
You do have to be careful that you stay within the time lines, properly identify potential replacements, and don't take receipt of any proceeds or Boot, which is taxable. I quick Google search on the topic should give you pretty good start, then find a reputable intermediary is you decide to proceed.
Having done one recently on an appreciated duplex out West, it provides a huge benefit.
You really need to discuss this with a 1031 company/lawyer - we can give you examples, but the end result rests with your 1031 company
Examples (must be equal value + $1):
- House to house
- Rental units to rental units
The biggest advantage is deferred tax payment on one's investment property. I would suggest that you discuss this with your accountant to determine the pros and cons of 1031 exchange.
The pros, of course, are the tax benefits of deferring capital gains on the property being sold. One of the risks I have encountered over the years is due to the deadlines imposed on the exchanges. If an investor waits too long to make his exchange purchase decision he is not in a good negotiating purchase and ends up over paying for the new property.