Tax deferral through 1031 Exchanges offers a means to preserve the wealth that you have worked so hard to accumulate and to grow your assets by reinvesting the tax savings.
In a typical Forward Exchange, the most common type of exchange, the taxpayer or investment property and acquires Replacement Property of equal or greater value within 180 days. The use of a Qualified Intermediary, such as Affiliated 1031 Exchange Services (Affiliated 1031), is a safe harbor requirement to facilitate a valid tax-deferred exchange. This Qualified Intermediary must possess intimate knowledge and a thorough understanding of 1031 regulations. Before you begin the exchange process, be sure to consult with your tax or financial advisor to ensure that a 1031 exchange is right for you. Then simply contact a Affiliated 1031 Exchange Coordinator at our toll-free number 877-(USE)873-1031. Your Exchange Coordinator will lead you through the process, answering your questions and providing guidance along the way.
Before the sale of the first property, the Exchanger must complete the documentation prepared by Affiliated 1031. At closing, the proceeds are delivered directly to Affiliated 1031, as the Qualified Intermediary.
The Exchanger must identify the property to be purchased (generally called the “Replacement Property”) within 45 days following the sale of the Relinquished Property. The taxpayer may generally identify three properties as a potential Replacement Property, or more under alternate rules of identification.
The Exchanger must purchase the Replacement Property within 180 days following the sale of the Relinquished Property, which must be an identified property, subject to the rules listed above. At closing for the Replacement Property or Properties, the exchange proceeds are paid directly by Affiliated 1031, as the Qualified Intermediary, to the closing agent. The Forward Exchange is one of many possibilities under IRS section 1031 to qualify for tax deferral in a 1031 exchange. Other types of 1031 exchanges include: Reverse Exchange, Construction and or Improvement Exchange, Swap and Drop, Partial Exchange, Contract Exchange. Affiliated 1031 provides decades of expertise for all types of 1031 exchanges. Please contact Affiliated 1031 to discuss the possibility of a 1031 exchange.
For a successful exchange, strict adherence to Section 1031 is imperative. As an investor, it is important that you understand the following rules. Your Affiliated 1031 Exchange Coordinator can help answer any questions you may have.
Both the property sold (Relinquished Property) and the property purchased (Replacement Property) must be held forn investment or productive use in a trade or business. Primary Residence or Vacation/Secondary Residence, do not function for a 1031 exchange.
Replacement Property(ies) must be identified within 45 days of the sale of the Relinquished Property and must be purchased within 180 days of the sale of the Relinquished Property.
You can identify up to three Replacement Properties of any value during the Identification Period, or more, subject to certain conditions.
The Replacement Property must be “Like-Kind” to the Relinquished Property. Any type of real property is Like-Kind to other real property as long as it is used for investment purposes. For example, a shopping center is like-kind to an investment condominium and a warehouse is like-kind to raw land.
The party selling the Relinquished Property must be the same party purchasing the Replacement Property or a disregarded entity with respect to that party.
You must purchase a property of equal or greater value to the property sold or pay tax on the difference.
You must use all of the cash proceeds from the sale of your Relinquished Property toward the purchase of Replacement Property or pay tax on the difference. If you offer seller financing on your Relinquished Property you may be subject to tax as the principal is repaid.
To qualify for safe harbor tax deferral, sale proceeds must be held by a Qualified Intermediary between the sale of the Relinquished Property and the purchase of the Replacement Property.
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