7 "DON'Ts" 1031 EXCHANGERS Should Know
Over my years as a REALTOR® in the Greater Asheville, NC area, I have seen strong appreciation in the real estate market.
During that same time,
I also have noticed with interest the increasing number of clients who are approaching creative-retirement ...the famous (or maybe infamous) "baby boomers".
I don't know if there is a connection between the baby boomers and 1031 investing in Asheville, but, just in the past few years, I can tell you for sure that the demand for information about 1031 Tax Deferred Exchanges under Carolina blue skies has "flowered".
( Carolina blue skies and flowers photo,
by Green-o-Lina)
Also, I notice a trend in that more and more my clients want to know about 1031 "green" or ECO-friendly investments and whether they can qualify their vacation/second homes for an Like-Kind Exchange.
Although I have done many successful 1031 Exchange transactions, and have taken advanced training in this subject area I am NOT an expert on the intricacies of the IRS tax code. I like to refer my clients to those who are experts for details about the mechanics of the 1031 Exchange, especially in terms of Vacation Homes.
One thing I know for sure--In order to conduct a valid 1031 Exchange it generally is necessary to have such property rented to unrelated parties for a period of time both BEFORE and after the exchange, for example.) In making sure a property actually qualifies for the 1031 requirements INTENT is all-important.
In this regard, there are many details that a Qualified Intermediary explains and handles.Please do contact a QI before investing.
THE 7 DO NOT DO LIST I can suggest that investors DO NOT :
1) inadvertently indicate in a Contract that you intend to live in the property,
2) sign a listing agreement soon after its purchase,
3) apply for “owner occupied” financing on the property,
4) move into that property within a specified period of time,
5) ignore rental history (it must be rented by its tenants for a significant time)
6) claim the "mortgage interest" deduction for the property on yours tax return,
7) treat a 1031 investment property as a "time-share" arrangement. Section 280A of the Tax Code spells out the Test. Personal use of the property may not exceed the greater of: a). Fourteen (14) days; or b). Ten percent (10%) of the number of days that the property is rented at fair market value to others.
copyright greenolina 2007
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