Here is a comprehensive tutorial which explains every aspects of a 1031 exchange.Read More
Every year approximately 300,000 taxpayers make use of Internal Revenue Code Section 1031 to defer the payment of capital gain and depreciation recapture taxes on the sale of their investment or income property.
Not only does 1031 exchanging dramatically increase your buying power because you are saving so much which might have been lost to taxes, there are many other benefits as well.
In a normal sale, depreciation is owed and calculated at a rate of twenty-five percent. Thos savings plus the deferral of gain can add up quickly.
A 1031 exchange will allow you to relinquish an under performing property and acquire new replacement property which is better suited to generating an improve financial return to the Exchanger/Seller.
Exchanging allows the transfer of an appreciated asset and the subsequent acquisition of several replacement properties which can serve to improve an investor's overall loan to value ratio while also reducing risk.
Many long term investment property owners utilize the 1031 exchange to transition from a property which require significant management responsibility to a property or portfolio of properties which are professionally managed and which generate cash flow which is paid monthly. Tax deferred mailbox money indeed!
If you have a living trust together with a legacy portfolio of appreciated properties with lots of capital gain or trapped equity, you can pass those assets to your heirs with a fully stepped up basis at date of death.
Generally, when one discusses exchanges, the type of exchange referred to is the delayed, deferred exchange. In a delayed exchange, the Relinquished Property is sold at Time 1, and after a delay of up to 180 days, the Replacement Property is acquired at Time 2.
The reverse exchange represents an exchange in which the Exchanger needs to buy the Replacement Property before he can sell the Relinquished Property. This usually requires a loan from the Exchanger as the new property is held in an LLC until the old property is sold.
Sometimes, the Replacement Property requires new improvements to make it viable for the specific purpose the Exchanger has intended for the property. Such construction can be completed while the property is held in a separate LLC in much the same way as in a reverse.
The IRS requires that you utilizie the services of a Qualified intermediary to assist in the coordination and execution of your 1031 exchange. We've partnered with Fyntex, one of the nation's leading 1031 exchange processors who provide the most secure and seamless experience for Exchangers.
Fyntex routinely provides 1031 exchange processing services through their partner network of banks, settlement companies and securities broker-dealers. The benefits of their value proposition, listed here, are unique in the 1031 exchange industry.
It is important to understand how the math associated with a 1031 exchange can impact your ownership. A completed 1031 exchange not only defers capital gain and depreciation recapture taxes, it also dramatically increases your buying power as well.