Real Estate Professionals
Copyright 2014. OFF MARKET. All rights reserved.
If you are considering completing a 1031 Like-Kind Exchange, below is an overview of the information that would be needed. Once the information below is received, the next steps would be to calculate the taxable gain (if any) and the deferred gain. It is important you work with a CPA and a Qualified Intermediary when completing a 1031 Like-Kind Exchange.
Should you have any questions regarding any of the items below, please do not hesitate to contact us We got got the right team in place. When you please have the following points ready....
Description of like-kind property given up (can be more than one)
Description of like-kind property received (can be more than one)
Date like-kind property given up with originally acquired
Date you actually transferred your property to other party
Date like-kind property you received was identified by written notice
to another party
Date you actually received the like-kind property from other party
Did the 1031 exchange involve a “related party”?
Our company will help you and guide thru the entire Process of getting ready to invest with the 1031 Exchange if you would like more information and to work with us please fill in the Short form and we will contact you within 24 Hours.
Please consult your tax adviser or attorney for specific details and qualification before attempting an 1031 Exchange
WHEN PURCHASING A REPLACEMENT PROPERTY
"Seller should be aware that buyer intends to perform an IRS 1031 tax deferred exchange. Buyer should request Seller's cooperation in such an exchange, and should agree to hold Seller harmless from any and all claims, liabilities, costs, or delays in time resulting from such an exchange. Seller should agrees to an assignment of this contract to an agency by the Buyer."
A) The name, address and telephone number of the Exchanger
B) The closer/escrow holder's name, address, telephone number and file number.
Include language establishing the intent to effect a §1031 tax deferred exchange in the Purchase and Sale Agreement. The following are examples:
WHEN RELINQUISHING A PROPERTY.
"Buyer should be aware that Seller intends to perform an IRS 1031 tax deferred exchange. Seller should request Buyer's cooperation in such an exchange and agrees to hold Buyer harmless from any and all claims, liabilities, costs, or delays in time resulting from such an exchange. Buyer agrees to an assignment of this contract to an Agent by the Seller."
Exchanges protect investors from capital gain taxes as well as facilitating significant portfolio growth and increased return on investment.
Assuming a 25% down payment and a 75% loan-to-value ratio, the seller would only be able to purchase a $520,000 new property.
If the same investor chose to exchange, however, he or she would be able to reinvest the entire $200,000 of equity in the purchase of $800,000 in real estate, assuming the same down payment and loan-to-value ratios.
An investor has a $200,000 capital gain and incurs a tax liability of approximately $70,000 in combined taxes (depreciation recapture, federal and state capital gain taxes) when the property is sold. Only $130,000 remains to reinvest in another property.
Thanks to IRS Section 1031, a properly structured 1031 exchange allows an investor to sell a property, reinvest the proceeds in a new property and to defer all capital gain taxes. In others words, you can avoid paying capital gain taxes by using the 1031 exchange for the rest of you life.
IRS Section 1031 (a)(1) states:
"No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment."