Who here has questions about 1031 exchange properties? Unless you have done a few of these exchanges I am sure everyone probably has quite a few questions so let us take a moment and talk about what is necessary when exchanging properties. Most importantly we want to make sure that we are protected from paying taxes while doing our 1031.
For those of you that are new to 1031 exchanges in general there are several terms that are used to mean the same thing such as starker exchange or like kind exchange. Essentially what you are trying to do is take a business asset, usually a property, and sell or exchange it for a new property. With a like kind exchange you are able to do defer taxes that you would pay on any of the profit from the sale. This will allow you to roll over that profit into the new property or asset and save a lot of money on your taxes.
It is very important that you understand that all properties exchanged in a 1031 must be business properties. This means your money cannot be rolled over into a new personal residence for yourself. It must have been a commercial property or a rental property that is sold and a new commercial or rental real estate investment is made. If you were to use the money from the starker exchange to buy a personal property then you will be liable for the taxes you were trying to avoid by doing this tax-free exchange.
When looking for 1031 exchange properties, it is important to understand the timeframe that you have to work with. For instance, when engaging in a 1031 exchange you must identify the replacement property within the first 45 days following the sale of your previous property. It does not mean that you need to a buy business property within 45 days but must at least identify a possible property within that timeframe.
This can be very confusing for many people, but the property that you have identified as a replacement property in your 1031 exchange does not need to be the same asset that you eventually by. It is very possible to identify a few different properties as likely candidates for the purchase so you can complete the exchange as long as you follow through and complete the entire process with a new real estate investment.
It is important that your final real estate investment for the 1031 exchange property is complete within 180 days of the sale of your original real estate asset.
As you can see a 1031 exchange can be somewhat complicated so it is important that you research as much as possible to make sure you get the right information as well as work with qualified agents that could help steer you through the process. When deciding on your 1031 exchange properties the most vital thing is to make sure that the new property is owned within the proper time frames.
About the Author:
James provides information about the
1031 exchange properties through his website on
1031 exchanges.
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392
Date Published :
Apr 13 2009