How To Complete a 1031 Tax Deferred Exchange : 1031 Exchange, tax deferred, investment propoerty, Starker exchange, capital gains taxes, like-kind, equity,

How To Complete a 1031 Tax Deferred Exchange

What is the purpose of a 1031 exchange?
A 1031 tax deferred exchange allows you to roll-over all of the proceeds received from the sale of an investment property into the purchase of one or more other like-kind investment properties. At closing, proceeds are transferred to a third party--called a facilitator or qualified intermediary--who holds them until they are used acquire the new property. A 1031 exchange is often referred to as a Starker exchange.

Exchanges Allow You to Delay Capital Gains Taxes
Capital gains taxes are deferred if all of the exchange funds are used to purchase like-kind investment property.
The deferment is like getting an interest-free loan on the tax dollars you would have owed for a cash sale. More equity is retained, and that helps you move into properties of higher value each time you perform a 1031 exchange.

What's Eligible?
A 1031 exchange is possible when you sell real estate held for investment purposes.

Like-Kind Properties
Exchanged properties must be like kind. For a real estate exchange this means real-property for real-property, but not necessarily land for land or a rental house for another rental house. Take a look at the IRS rules for specific information about what types of properties qualify as like kind.

You can exchange a single property for multiple properties, or purchase one property from the proceeds of several. Proceeds not used to purchase new investment property are taxed as a cash sale.

"In a like-kind exchange, both the property you give up and the property you receive must be held by you for investment or for productive use in your trade or business." -IRS

pk

Email Page | Print Page