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Facts
about 1031 Exchange
When
you sell Naples real estate or real estate
anywhere in the United States you have to
pay capital gains tax on the gain from the
sale of the property. The gain is caused
by either taking depreciation deductions
for tax purposes or from the appreciation
over time of the property.
The IRS Section 1031 Exchange offers the
major exception to defer capital gains tax
normally due on the sale. With the 1031
exchange you can sell an investment
property or a business, and utilize the
proceeds in the purchase of a property of
equal or greater value without having to
pay capital gains tax.
Benefits of 1031 Exchange
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There
are several benefits to consider with a
1031 Exchange. For example, you could use
the proceeds to buy bare land and
construct a building on it, consolidate
several properties into one to ease
management and put all funds into a more
valuable property, take one property and
diversify into several properties, and
purchase commercial property from
residential proceeds.
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Property
that qualifies for 1031 Exchange
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To
qualify you need to sell property that was
held for business or real estate purposes
for the purchase of other business or
investment property. However, YOU CANNOT
sell investment property for the purchase
of personal property, as this would not
qualify for a tax deferral under section
1031
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5 Things to understand about a 1031
Exchange
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1.
To avoid any taxable gain you must
reinvest all the Capital gains and
purchase property of equal or greater
value.
2. From the date that your old/former
property CLOSES, you have 45 days to
declare one or more properties you will
purchase.
3. From the date of CLOSING of your
old/former property you have 180 days to
CLOSE one or more properties on your
45-day list.
4. The entity that is on the title of the
old/former property must remain on the new
property title.
5. A qualified intermediary, sometimes
known as an Accommodator, can only handle
the proceeds from the sale of the
old/former property. You cannot personally
touch the money nor can a friend, broker,
employee, CPA, or attorney to held the
money for you.
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Who is a qualified intermediary?
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Selecting
the right QI (Qualified Intermediary) is
very important to the exchange process.
There are no Federal or State laws that
control who can be a QI. However, there
are laws that state who cannot be a QI.
That includes your lawyer, CPA, bank, or
family members, etc.
If you are considering buy Naples Real
Estate or any Southwest Florida Property,
we would be happy to give you contact
information for a qualified QI. Because we
help investors every week to purchase
property with 1031 exchanges, we will make
it a positive experience for you. Be sure
to fill out our Naples Real Estate
property request form and indicate that
you would like to purchase using an
exchange, and in the comments request QI
contact information.
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The
reverse exchange was established to defer
the capital gains taxes in the same manner
as the 1031 exchange. The reverse exchange
in more complex and more costly to set up
than the standard 1031. You should consult
a tax advisor and exchange professional to
assist you.
The major difference in the Reverse vs.
Standard 1031 Exchange is that you can
purchase property for the exchange before
you sell your old/former investment
property.
You must take title to the new property in
what is called an EAT (Exchange
Accommodations Titleholder) which is set
up by the Exchange company. The EAT takes
title to the new property, holds or parks
it until the old closes. Then the EAT
transfers the new property to you.
The reverse exchange must be completed
with 180 days from the date the EAT
purchases the new property for you.
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The
information provided on this web site is for general
informational purposes only and should not be relied
upon to be legally correct. Be sure to contact the
proper professional to assist you with a 1031
Exchange.
Contact us
for more information
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