1031 Exchanges: What You Didn’t Know
Internal Revenue Code can be spouted off by any tax guru even though most people don’t know anything past 401(k). 401(k) is your retirement simply named after a section of tax code.
Section 1031 is finding itself popping up more and more each and every day, into normal conversation. We hear the talk all over from soccer moms to investors, and from Real Estate agents to title agents. So many people nowadays are interested in turning the word into a verb. Most discussion of 1031 occurs in the field of Real Estate, though it isn’t restricted to that field.
Now it’s time to find out exactly what 1031 is. 1031 Exchange can be called a like-kind exchange or Starker and is a way of swapping one asset for another. Most of the time when an exchange occurs, none or limited tax is due at the time. Changing your investment is as simple as capital gain cashout. Find out how this is done, go here!
You can allow your investment to grow tax deferred. You must follow some rules when property is being exchanged in a 1031 case.
1031 is not allowed to be used on personal taxes
1031 is intended for investment or business property, you may not use it on a personal residence.
Some personal property may qualify
TIC’s can qualify in such cases even though all other personal property exchanges will not.
Like-Kind is a very broad term
This phrase means something different than what you think. Things can be exchanged across the board, with rather liberal rules. An apartment building and a strip mall are great examples of the liberal exchange. The post at http://wiki-box.wikia.com/wiki/1031_Exchange_Requirements_%E2%80%93_Company_that_has_many_interesting_offers can give you more facts and information about 1031 exchange.
A Delayed Exchange is something that is possible
The way it works, usually, is a trade occurs between to individuals, one property for another. It can be very tough to find the exact property that you are looking for.
A replacement will be purchased by a third party with the proceeds from the sale of the first property.
A Replacement Property must be designated
To keep from spoiling the 1031 treatment, you must designate a replacement property within 45 days of the sale of the first property.
It is possible to designate more than one replacement
More than one property, and up to three, can be chosen as long as one of them is the replacement, according to the IRS.
6 months is the limit on closing
You have 180 days to close on the new property, after the closing of the sale of the original property.
All cash is taxed
The boot, which is the monies that are paid to you from the sale, are taxable.
Other debt like mortgages
If you receive cash back after the repayment of the original mortgage, it will be taxed by the IRS as boot.
Working with a professional from www.1031gateway.com is really a great idea when it comes to any possible questions involved with the 1031 process.