Don’t Pay Capital Gains Tax on Your Investment Property
Section 1031 of the IRS tx code allows a taxpayer to "exchange" one or more investment properties and purchase one or more "like kind" properties and defer the capital gains taxes on the proceeds from the sale. This process is governed by Section 1031 of the IRA Tax Code. The seller of the property, also known as the exchanger, must follow certain rules for the transaction to qualify as a tax-free 1031 exchange.
A 1031 exchange allows a taxpayer to defer the capital gains tax on the sale of
investment property when that property is exchanged like-kind investment properties.
Depending on the state of residence, this can be a 20 to 30 percent.
Section 1031 of the IRS tx code allows a taxpayer to "exchange" one or more investment properties and purchase one or more "like kind" properties and defer the capital gains taxes on the proceeds from the sale. This process is governed by Section 1031 of the IRA Tax Code. The seller of the property, also known as the exchanger, must follow certain rules for the transaction to qualify as tax.
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The answer is Yes. While it is possible to structure an exchange incorporating Seller Financing, it is imperative that the exchanger discuss Seller financing and the possible tax ramifications with the exchanger’s tax advisors before the 1031 is structured to ensure proper structure of the overall 1031 exchange.
The answer is Yes. This type of exchange is called a reverse exchange. Reverse exchanges are made a little more complex than a typical delayed exchange because the IRS Code prohibits the exchanger from owning the replacement property and the relinquished property at the same time. As a result, the QI has to hold title to the replacement property until the relinquished property is sold.
The answer is Yes. This applies only if your second home qualifies as an investment property.
The answer is Yes. There are two basic rules which are very important. First, the exchange time periods must be strictly adhered to. Both the time for the 45th day and the 180th day deadlines start running from the date the relinquished property closes. Second, If several sales are included in the same exchange, the replacement property identification rules permit listing only three properties of unlimited value or more than three properties whose values comply with the 200% identification rule. As with all 1031 exchange rules, these rules are strict and should be discussed with your tax advisor to assure compliance.
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215 Rivervale Road,
River Vale, NJ 07675
