Attention Multi-Family and investment property owners.
If you are thinking of selling make sure all of your bases are covered. Capital gains tax on investment property can be staggering especially if you have owned it for many years. There are legal ways to defer that tax and in some cases avoid it. I have extensive training in 1031 tax exchanges and would be happy to walk you through the process. Below is some basic information on the tax law.
What is a Section 1031 tax deferred exchange?
Section 1031 of the code enables the owners of qualifying investment property and business equipment that is used in a trade or business or held for investment to indefinitely defer that taxable gain (including depreciation recapture) when selling a qualifying property, provided the sales proceeds are reinvested in similar, or “like-kind” property and other guidelines observed.
Established in the 1920’s, Section 1031 Exchanges enable property owners to remain fully invested when they trade up to a larger or newer property, or diversify or consolidate their property ownership. All of these transactions can be completed on a tax deferred basis.
What types of properties may be included in a Section 1031 Exchange?
Exchanges may involve real property or tangible personal property such as aircraft, vessels, and fleet vehicles; it excludes stocks, bonds, partnership interests and similar “intangible property.”
The properties must be used in a trade or business or held for investment, and must be of
A similar nature – real property is given up for real property or equipment is exchanged for similar equipment.
Section 1031 permits flexibility; for example, unimproved land may be exchanged for a commercial building.
Why does the “qualified intermediary” play a role in the exchange?
To qualify for tax deferred treatment, it is important that the owner have no access to the proceeds realized on the sale of the existing property to avoid constructive receipt – the owner may receive the replacement property only in the exchange
Under IRS rules, the use of a qualified intermediary resolves the constructive receipt issues so the exchange can qualify as tax-deferred.
To obtain more information about Section 1031 exchanges or Atlantic Exchange Company call – 1877-232-1031 or visit www.aec1031.com