A 1031 EXCHANGE COULD SAVE YOU MONEY

It’s possible... If you qualify for an IRS §1031 Exchange, you can postpone all the capital gains tax on the sale of your property. A tax-deferred Exchange is a method that allows a property owner to trade one property for another without having to pay any federal income taxes on the transaction.

In an ordinary sale transaction, the property owner is taxed on any gain realized by the sale. But in an Exchange, some or all of the tax on the transaction is deferred. There are stringent rules and regulations that must be met:

1. The replacement property must have a fair market value equal to or greater than the relinquished property.
2. All of the taxpayer's equity or more must be used in acquiring replacement property.
3. It cannot be your primary home. You must be selling an investment property and buying an investment property. Both must be within the United States.
4. You must provide a list of replacement properties within 45 days from the time you sell your property and you must purchase one of these properties within 180 days (weekends and holidays are included) of the sale of your relinquished property or by the date when tax returns are due (including extensions), whichever occurs first.
5. Certain legal language must be disclosed on the selling and buying side.
6. Contact a Qualified Intermediary as soon as possible after escrow is opened or after entering into the Purchase and Sale Agreement and advise him or her of your desire to do a 1031 Exchange well in advance of the closing date. The Qualified Intermediary will draft the appropriate Exchange Agreement, Assignments and Exchange Closings instructions so that they can be executed prior to closing on the property being sold.

*This information is provided as a as courtesy and is in no way to be construed as offering legal or financial advice. We highly recommend you seek competent legal and financial advice before proceeding.