1031 exchange

1031 Exchange and the Capital Gains Tax Rule

A 1031 exchange and the Capital Gain tax edict is not a tax loophole. It is an area of the Internal Revenue Code, written by Congress, to allow anyone who meets all the requirements to sell their property and hold up paying taxes on the income.

If your plans comprise using the money from the sale of a business or investment property to buy more of the same, a 1031 real estate exchange provides higher proceeds for your next investment-more than you could gain through the re-investment of after-tax proceeds.

Discerning the Capital Gains Tax Rule and Avoiding the Capital Gains Tax
All relinquished (old) and replacement (new) property must be vacant land, rental property or property used for trade, business or investment. The property must be held for at least a year and a day to qualify for a 1031 Exchange. If the properties meet these requirements, you may exchange any real estate for any other class of real estate.

* You cannot have actual or constructive control of any of the proceeds received from the sale of the old property. By law, all money is held by a Qualified Intermediary (also referred to as an Accommodator or Facilitator). You cannot have an associate or employee, your attorney, broker or CPA hold the proceeds, nor can you leave the proceeds in escrow until the second property is purchased.
* You must reinvest all cash proceeds from the sale, and purchase a new property or properties of equal or greater value, in order to avoid taxation on the gains.
* You have 45 days from the date of closing on the old property to identify a list of properties, from which you will purchase the new property.
* From the date of closing, you have 180 days to close on one or more of the properties from your 45-day list.
* The titleholder on the old property must be the same titleholder on the new property.

I am not an attorney, this article is for informational purposes only. I recommend that anyone considering a 1031 exchange consult a professional in this area.

Hope this information helps.



James Loftis Broker/Owner Real Estate 911 Inc.

Http://RealEstate911.com