Why Consider a 1031 Real Estate Exchange Specialist?
There are many advantages to structuring your transactions as a 1031Real Estate Exchange Specialist
- Defer taxes (Up to 35-40%of the gain)
- Greater purchasing power
- Improve cash flow
- Diversify or consolidate a real estate portfolio
- Build & preserve wealth
- Switch property types
- Expand into other real estate markets nationally
Property That Qualifies for IRS Section 1031 Treatment
- Single Family Rentals
- Golf Courses
- Some Recreational Properties
- Multi Family Rentals
- Raw Land
- Leasehold interests of 30 years or more
While the definition of “like kind” is stricter when it comes to personal property, investors may still take advantage of tax deferred treatment in an IRS Section 1031exchange in the sale of investment personal property. The personal property exchange can be utilized to relocate a business, to upgrade equipment, or to streamline production by replacing outdated technology and machinery with more efficient models.
Like Kind Properties Include:
- Livestock of the same sex
- Automobiles for Automobiles
- Buses for Buses
- Doctor Practice for Doctor Practice
- Manufacturing equipment for manufacturing equipment
Section 1031-Tax Deferred Like-Kind Exchange of Property Held for Income, Investment or Business Use.
Section 1031 of the Internal Revenue Code (“1031 Exchange”) provides that real property held for rental, investment or use in a business (“relinquished property”) can be exchanged for “like-kind” real property also held for rental, investment or use in a business (“replacement property”) allowing the Investor to defer his or her Federal, and in most cases, state income tax liabilities.
It is important to note that 1031 exchange transactions are tax-deferred exchanges–not tax-free exchanges– as many authors and advisors frequently refer to them. The Investor’s capital gain and depreciation recapture tax liabilities are merely deferred–and can be continually and indefinitely deferred— into like-kind replacement properties acquired as part of a series of 1031 exchanges transactions.
The tax deferral benefits of the 1031 exchange allow an Investor to sell, dispose or convert real property without reducing his or her cash position by paying capital gain or depreciation recapture taxes. This provides the Investor with the continued liquidity necessary to increase his or her real estate portfolio by trading up in value and ultimately increasing his or her net worth by improving cash flow and capital appreciation from the portfolio.
A Qualified Intermediary is required when completing a 1031 exchange transaction. Section 1031 of the Internal Revenue Code applies to personal property as well as real property.