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Rita Gibbons
571-330-0741
Email
Rita
Jennifer Choiniere
540-354-2728
Email
Jennifer
Linton Hall Realtors
12753 Braemar Village Plaza
Bristow, VA 20136
703-485-4554
Investment Property ...
We're well-qualified to assist you with your 1031 exchange. We know the IRS laws regarding property exchanges and will ensure a smooth transaction, from the sale of your investment property to the purchase of your new investment property.
The 1031 Exchange is quite possibly the most powerful investment tool available to property owners. Exchanging gives investors the ability to move from investment to investment, whether it is real estate, heavy equipment, business assets, artwork or aircraft, while keeping their equity intact.
IRS Code 1031 allows investors to defer paying both Federal and State capital gains taxes and depreciation recapture when they sell a investment property and buy another investment property of 'like kind' through an exchange transaction. Thus, investors can buy the property they want and build their wealth faster by utilizing the exchange process.
We will assist you in the real estate process of selling your investment property, locating a qualified intermediary to facilitate the entire process for you, and the purchase of your replacement property.
The IRS has many steps that must be followed in order for an exchange to truly meet the requirements of IRS code 1031. Our goal is to assure your exchange transaction is fully compliant by providing you with the tools to ensure your exchange is completed according to the IRS code.
Briefly, here's how a 1031 Exchange works:
Investors buy real estate to earn a profit. Decisions are carefully made to determine the effects of location, potential rents and expenses, financing and a multitude of other important factors in an attempt to realize much of a profit as possible. Once the profit is made, the typical investor sells his property, pays his taxes and reinvests in other real estate. The vast majority of real estate investors seldom make use of one of the most valuable techniques for increasing and preserving profit we have available: The tax deferred exchange.
Timeframe: From the time of closing on their relinquished property, the investor has 45 days to nominate potential replacement properties and a total of 180 days from closing to acquire the replacement property.
Set up: The exchange must be set up prior to the closing of the investors relinquished property. The investor cannot have actual or constructive receipt of the funds. The investor or their agent should contact an Exchange Accommodator as soon as possible to begin setting up the exchange and also inform Escrow of their intention to complete a 1031 exchange.
Identification requirements: The investor must ID the replacement property prior to midnight on the 45th day. The investor normally nominates three potential properties of any value. Then, acquires one of these three properties within 180 days. Typically, a common address (unambiguous description) will suffice. It is also a good idea to have a pending offer. If the investor needs to identify more than three properties, then the combined values of all properties cannot exceed 200% of the relinquished property's value.
Values: In order for an investors exchange to be completely tax deferred, the value and equity of the replacement property should be equivalent to or higher than that of the relinquished property. Investors can decrease mortgage levels by bringing cash into the replacement property, but they cannot increase mortgage levels and take cash out of the transaction without a tax implication. If they take cash out or go down in value on their replacement, then they would pay taxes on a portion of the transaction.
Title: It is very important to review how title is held on the investors relinquished and replacement properties and consider potential financing requirements. The vesting needs to be consistent, in order to maintain the IRS continuity of vesting requirement.
History: Present exchange laws are based upon tax provisions dating back to 1921. Subsequent code changes, tax court rulings, and Revenue Rulings have created a set of clear, concise guidelines for performing defensible tax deferred exchanges. Judicial decisions made in 1979 and the 1984 Tax Reform Act added the concept of the delayed exchange. It is possible to sell your property today and complete your tax-deferred exchange in six months. By using the technique of the "reverse exchange" you may acquire a property today and sell the property you no longer wish to own in the future while still deferring taxes on the sale.
Please call (571-330-0741) or email (LuvnNLivn@msn.com) me with any questions you may have regarding investment property. There's an excellent booklet available, free of charge, at 1031 Handbook- "Your Guide to Wealth and Growth Through 1031 Exchanges".
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Rita Gibbons
Linton Hall Realtors
571-330-0741
Email:
RGibbons@LintonHallRealtors.com
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