1031exchangeguide

 

401(k) is just about as far as most people get when it comes to Internal Revenue Code.  There is a section of tax code named 401(k), the namesake of your retirement plan. 

 

Section 1031 is finding itself popping up more and more each and every day, into normal conversation.  From Real Estate Agents to Investors, from soccer moms to title companies, everyone is talking.  We even hear talk of making it into a verb.  Even though 1031 isn't restricted to real estate, most talks occur in that field.

 

What is 1031 some people might ask.  The process of exchanging one asset for another here is called 1031 exchange, like-kind or Starker.  Most swaps that take place have limited tax that is due at the time of the exchange, if not none.  You can easily change your investment by cashing out your capital gain.

 

Cashing out allow the investment to grow, tax deferred.  You must follow some rules when property is being exchanged in a 1031 case. 

 

1031 is not allowed to be used on personal taxes

 

1031 is intended for investment or business property, you may not use it on a personal residence.

 

As with any tax rule, some holes may be found

 

Not all personal property exchange will qualify, however TIC's (tenant in common) do.

 

Like-Kind is a very broad term

 

This phrase means something different than what you think.  The rules are pretty liberal, allowing for exchanges that don't seem logical.  For instance, an apartment building could be traded with a strip mall. For further information regarding 1031 exchange, you can go to http://financial-dictionary.thefreedictionary.com/1031+exchange.

 

Delayed Exchange

 

The traditional way of exchanging is one property for another property, between two people.  The only difficult part is finding another individual with the exact property. 

 

Delayed exchange allows a third person to hold the money from your sale to buy a replacement.

 

A Replacement Property must be designated

 

After the sale of the first property, the funds are send to an intermediary, and then you have 45 days to designate a replacement property to ensure the 1031 continues properly.

 

It is possible to designate more than one replacement

 

The IRS allows the designation of up to three properties after the sale as long as you choose one of them.

 

You must close your sales within a 6 month term

 

Delayed timing has a second rule, states you must close on your new property within 180 days of the old sale date.

 

Any cash received on the transaction is taxed

 

Any cash that is paid to you from the sale of the property, from the intermediary is known as the boot, and is subject to taxation. Using a calculator would make things easy in this case.

 

Other debt like mortgages

 

Forgetting about loans attached to previous properties and receiving a gain will be considered a boot and will be taxed.

 

Working with a professional is really a great idea when it comes to any possible questions involved with the 1031 process. 

 

It used to be that only people who worked on taxes needed to know about 1031 exchanges, but they are becoming more and more a mainstream conversation. Like-kind exchanges and Starker exchanges are referring to the same thing. Simply put, it is trading one business or type of investment for another one. Doing it as a normal sale and then buy will mean taxation on both purchases, but doing a 1031 exchange helps you to avoid that expense. Since you are just making a trade, there is no money that you have to be taxed. Only capital gains are taxed, so this doesn't qualify.

 

Doing a 1031 exchange for your investments will help it to grow faster because you will save money on the taxes. There is also no kind of limit on how many times or how often you can do this kind of trade. It is just up to you to decide how much you want to trade your investments. Each swap that you make, may give you a profit, but you can avoid the capital gains tax until you cash out. When you do decide to cash out, you will only have to pay the tax on the final investment, not all of the other ones that led up to it.

 

If this sounds appealing to you, there are some things you should know. Personal real estate is not included in your possibilities. This is only for investments and business property, so you can't use it for personal real estate. You may be able to use it to trade vacation homes, but this can be very tricky, so make sure that you understand it fully. You can't use it to get a new home to live in, but you may be able to do it with other items, like artwork.

 

You do have to trade items that are of a like-kind, but that is not as limiting as you may think. You may fall into a trap if you don't know the rules, but for the most part, you can exchange real estate for most other kinds of real estate. You can also exchange one kind of business for another. Starker exchanges refer to a specific type of 1031 exchange that is delayed. This just means that there is a third-party who holds on to the cash when you get rid of your property and then uses it later when there is something else you want. It is still considered a trade because you are never in contact with the money. To read more about these exchange 1031, click here.

 

 

To make sure it qualifies to be a 1031 exchange, you will need to follow some rules. When you sell your property, you can never come in contact with the cash. The third-party you hire is the only one that can hold on to it. It is not a delayed exchange if you don't designate a replacement property within 45 days of the property's sale. You have to tell them what you want to use that money for in writing. Three kinds of property can be designated in this way if you want to open up your possibilities. To learn more details regarding 1031 exchange, you check out http://www.huffingtonpost.com/phil-jemmett/pros-and-cons-of-a-1031-t_b_4415703.html.

 

Let's talk about the IRC loophole known as the 1031 exchange.  First let's explore what a 1031 Exchange can do for you  Can you benefit from the IRC 1031 Exchange?  You can make your own decision after getting the low down.  Let's explore.

 

What is an exchange?  1031 exchange at www.1031gateway.com refers to section 1031 of the IRC.  Within the time guidelines among others, a properly structured 1031 Exchange lets investors defer capital gains when reinvesting in a second property after the sale of another.

 

Let's try to comprehend the power of the protection the 1031 exchange offers a property owner.

 

An investor has property A for $100,000 in capital gains from the sale, $35,000 in combined taxes, leaving only $65,000 to reinvest.

 

Assuming industry average of twenty five percent down with loan to value ratios of seventy five percent, would limit the buying potential of property B to only $260,000.

 

If that seller chooses to exchange, he or she would then be permitted to reinvest the entire $100,000, assuming similar loan-to-value ratios, that would allow the investor to purchase a new property of up to $400,000. To read more about 1031 exchange, you may visit https://www.youtube.com/watch?v=6LIAEfAIwPg.

 

Protection from capital gains is the hallmark of 1031 Exchanges.  Make sure you or your financial consultant understands all the terminology in 1031 exchanges.  Explore the benefits of a 1031 exchange, use a free online capital gains calculator to see if it's right for you.

 

Much due diligence is necessary prior to executing an exchange with a capital gains tax calculator.  To determine the viability of a 1031 exchange, consult with a pro.

 

Time limits are in play when it comes to 1031 exchanges, know your timetable or it could cost you.  A person who executes a 1031 has a max of 180 days or tax filing day to purchase the second property.  Executing a 1031 exchange right after you filed your taxes is recommended, allowing you the most time available to get property B.  Financial advisors, tax accountants and real estate professionals should be able to assist you with your 1031 exchange.  Speak with other investors for recommendations of a professional in your area that has experience with 1031 exchanges.  Good luck with your 1031 Exchange.  Know the ins and outs of the real estate game, and take advantage of the benefits a program like 1031 exchange provides.  Getting this process right is crucial, don't rush your learning curve, get help if you need it and use the money saved to buy bigger and better properties.

 

 

The IRC's 1031 exchange allows investors to maximize their investment potential and expand their portfolio.

 

For anyone who makes a living by purchasing and selling off a range of different properties, it's going to be very important to have a good handle on the different taxes you'll be facing. The biggest difficulty that anyone will have to deal with when they're working in the field of property sales is trying to find ways to make a profit on your work while still being able to meet and fulfill the various kinds of tax obligations that you'll need to meet.

 

Fortunately, when you're trying to figure out what kind of capital gains tax you might end up owing on a range of properties that you've sold, you can start looking into whether the property qualifies for a 1031 exchange exemption. Although you will have to dedicate a little bit of time to researching the various kinds of rules and tax regulations you will have to work with when making your own 1031 exchange like what you can find from this homepage, but there are fortunately a wide range of resources you can rely on to get you the latest tax information to help you make a more solid choice. If you're curious about how these kinds of exchanges might work for you, be sure to read the following post.

 

The first your you're going to have to figure out when dealing with any sort of reduction in your capital gains tax is how much you actually owe. You're going to find that the best resource you can use will be a capital gains tax calculator. You can find all kinds of different software programs that will be able to get the job done, and this should give you the kinds of information and resources you need to really end up paying the right amount of tax. You'll tend to find it a whole lot easier to get the most out of any 1031 exchange if you can figure out how to manage the math. For more information regarding 1031 exchange, you can go to http://www.ehow.com/about_6546257_1031-exchange-definition.html.

 

It's also important to do a bit of research so that you can learn which listing are allowed in your 1031 exchange. There are a couple of types of properties that will especially be good ones to sell when you want to avoid a capital gains tax.

 

 

In particular, you should be looking to offload properties that are still in action and that are exchanged for something that roughly does the same work. It can help to talk with a tax lawyer about whether any property you're trying to sell counts for this. It's going to be important for you to do the necessary research before you can get results. You can find the best sample results if you go here

 

For anyone who makes a living by purchasing and selling off a range of different properties, it's going to be very important to have a good handle on the different taxes you'll be facing. Most property dealers will tell you that handling the array of different taxes that come out of this type of property trading can be incredibly difficult to work with, especially when you're trying to meet your tax obligations while still making plenty of money for yourself.

 

Luckily, anyone who is trying to reduce the overall amount of money they'll owe in their capital gains tax will find that there are plenty of ways in which you might be able to arrange a 1031 exchange that can keep you safe from this trouble. It's important to realize that there are plenty of rules and regulations that you'll need to figure out prior to beginning your 1031 exchange, but once you have everything figured out it's going to be quite simple to do the necessary research and find the kinds of 1031 exchange properties that will get you saving money immediately. If you're curious about how these kinds of exchanges might work for you, be sure to read the following post.

 

It's important to spend a little bit of time researching the full amount of the capital gains tax you might owe before you begin looking to reduce it. This is where it can be helpful to purchase or download some kind of capital gains tax calculator. You can find all kinds of different software programs that will be able to get the job done, and this should give you the kinds of information and resources you need to really end up paying the right amount of tax. The more you can do the math on this type of stuff, the easier the rest of the 1031 exchange is going to be.

 

You're also going to have to figure out what kinds of listings are going to qualify for a 1031 exchange. There are a couple of types of properties that will especially be good ones to sell when you want to avoid a capital gains tax. If you want to learn more about 1031 exchange, you can visit https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_1031.

 

 

You should make sure that any properties you're dealing with are going to be those that are still actively working and that can be exchanged for something quite similar. The right kind of tax attorney will help you get a better perspective on this. The more time you can spend learning about the different ways to process a 1031 exchange from the 1031Gateway, the more likely you'll be to make good money.