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1031
Exchange Information
1031 Exchange - A 1031 tax deferred
exchange allows you to defer capital gains by rolling-over all of
the proceeds received from the sale of an investment property into
the purchase of one or more other like-kind investment properties.
At closing, proceeds are transferred to a third party, called a
facilitator or qualified intermediary who holds them until they are
used acquire the new property
Capital Gains -
Usually the difference between the original cost and selling price
of a capital asset, such as real property, after deductible expenses
have been taken. Capital gain is subject to taxation
Foreclosures - Foreclosure occurs when the
owner of real property fails to make payments on his mortgage and
the bank or other secured creditor sells or repossesses the property
Marketing Your Rental -
Rental Property Tips - How
would you like to own a property at the shore and have someone else
pay your mortgage for you. That is possible!
You can buy at the shore and rent your property
out for the entire summer and even in the winter time, if you want.
Rentals range in price according to their number of bedrooms and
baths, location to the beach and boardwalk, amenities and condition.
What is a Tax Deferred Exchange?
A tax deferred exchange is simply a
method by which a property owner trades
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 of the
property. But in an exchange, the tax on
the transaction is deferred until some
time in the future, usually when the
newly acquired property is sold.
These exchanges are sometimes called
"tax free exchanges" because the
exchange transaction itself is not
taxed.
Tax deferred exchanges are authorized by
Section 1031 of the Internal Revenue
Code. The requirements of Section 1031
and other sections must be carefully
met, but when an exchange is done
properly, the tax on the transaction may
be deferred.
In an exchange, a property owner simply
disposes of one property and acquires
another property, rather than the sale
of one property and the purchase of
another.
Today, a sale and a reinvestment in a
replacement property are converted into
an exchange by means of an exchange
agreement and the services of a
qualified intermediary-a fourth party
who helps to ensure that the exchange is
structured properly.
The IRS' new regulations make exchanging
easy, inexpensive, and safe.
Internal Revenue Code (IRC) Section 1031
is one of the last remaining tax
loopholes. It is a powerful tool that
allows investors to exchange any
investment property for any other
investment property. For your exchange
to be valid, you must follow specific
IRS regulations.
Here is an abbreviated list of the
regulations:
- The properties being exchanged
must be of like kind. For
example, you may exchange
- a house for another house (or
several houses)
- a house for commercial real estate
- land for rental property
- a strip mall for an office building
- any investment property for any
other investment property (as long
as it is not occupied as your
primary residence)
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You must identify and close on
your replacement property within a
specific period of time.
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100% of the proceeds from your
current property must be held by a
Qualified Intermediary and applied
toward your replacement property to
get a full tax deferral.
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Your replacement property must be
of equal or greater value to the
property you have sold to get a full
tax deferral.
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Properties being exchanged must
be used for investment. Personal
residences are not exchangeable.
Why use a 1031 exchange:
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To defer your capital gains tax
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To diversify
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Exchange one property for a larger
one.
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Exchange one property for several
properties.
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Increase depreciation.
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To simplify
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Exchange several properties for
fewer (or one) property.
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Improve the quality of your
property.
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Decrease management responsibility
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To relocate
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Exchange for a property closer to
where you live.
- Exchange to an area with higher
appreciation.
Please consult your tax advisor
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FASY REAL ESTATE
1229 Asbury Avenue
Ocean City, NJ 08226
(609) 398-8000 fax: (609) 398-5084
bfasy@comcast.net
1 (800) 662-3323
cell: (609) 602-4492 |
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