|
|
|
|
|
SERVICES :: 1301 TAX DEFERRED EXCHANGES
|
Thanks to the IRC §1031, a properly structured exchange allows an investor to sell a property, to reinvest the proceeds in a new property and to defer all capital gain taxes.
IRC §1031 (a) (1)
No gain or loss shall be recognized on the exchange or property held for productive use in a trade or business or for investments, 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 investments
The Power of Flexibility
Pursuant to IRC §1031, capital gain deferment requires the exchange of "like-kind" relinquished property for other "like-kind" replacement property. Any real property held for investment or real property used in a trade or business can be exchanged for any other real property used in a trade or business.
Exchange Five Powerful Strategies
1. The Delayed Exchange
A delayed exchange is the most common exchange format, providing investors the flexibility of up to a maximum of 180 days to purchase a replacement property. The use of a Qualified Intermediary is required to complete a valid delayed exchange.
|
Most investors today use a Qualified Intermediary to safely facilitate a simultaneous exchange.
|
Improvement (build-to-suit or construction) exchanges allow an investor to use exchange proceeds to either (1) make improvements to an existing property or (2) build new replacement property.
|
A "reverse exchange" is the purchase of the replacement property prior to closing on the relinquished property.
|
Exchanges of personal property, such as aircraft or business, can qualify for tax deferral.
|
The Delayed Exchange Process
Sale of the Relinquished Property
Prior to closing the sale of the relinquished property, the Exchanger enters into the Exchange Agreement with Qualified Intermediary. Pursuant to the Exchange Agreement, and Assignment is executed prior to closing, and Qualified Intermediary assumes the Exchanger's Purchase and Sale Agreement. Qualified Intermediary instructs the closing/escrow officer or closing attorney to directly deed the property from the exchanger to the buyer. Proceeds are transferred directly to the Qualified Intermediary, thereby protecting the exchanger from actual or constructive receipt of funds. Please note that Exchanger's ability to access exchange proceeds at any time. Please consult with our Qualified Intermediary Exchange Counselor for more details on these restrictions.
Identification of Replacement Property
The Exchanger must properly identify potential replacement properties within 45 calendar days. Qualified Intermediary provides the Exchanger with the specific identification requirements.
Purchase of the Replacement Property
The Exchanger has a total of 180 calendar days from closing of the relinquished property, or their tax filing date, whichever is earlier, to acquire "like-kind" replacement properties. Prior to closing on the replacement property, the Exchanger assigns the Purchase and Sale Agreement to the Qualified Intermediary purchases the replacement property with the exchange proceeds and transfers it back to the Exchanger proceeds and transfers it back to the Exchanger by a direct deed from the seller.
|
|
|
