Exchange 1031 An Exchange 1031, also known as deferred tax exchange is a simple strategy and method for selling a property and purchase another which qualify, within a specific time frame. The logistics and the process of selling a property, and then buy another property are virtually identical to those of any sale and purchase standardized, a "Exchange 1031" is unique, because the entire transaction is treated as an exchange and not as a simple sale. This is the difference between "exchange" and not simply purchase and sale which, at the end, enables taxpayers to(s) obtain deferred treatment.
The exchange of a property represents a recognized method to defer the payment of taxs on capital gains and it is important that you understand the components involved and the real intention of this type of transaction. It is within the Section 1031 of the Internal Revenue Code that we can find the tax code required for a positive exchange. We should like to point out that it is in the regulation of the exchanges of the same type" issued by the Treasury Department of the United States, which are the specific interpretation of the IRS and the generally accepted standards in practice, compliance with the rules and successfully conclude a transaction that meets the requirements.
Exchange 1031 Why? All property belonging to the owner or real estate investor, should consider an exchange when he/she expects to purchase a replacement "Of The Same Type" of property after the sale of their existing investment property. Nothing otherwise would require the payment of a tax on capital gains, which is currently between 15% and 23.8%. Also include the federal and state taxs of its state when it becomes an Exchange 1031.
Below we present the six rules to follow in an exchange:
Maintain the property as an investment: The property must be maintained as an investment for a minimum of 2 years.
Period of 45 days for the identification: They should identify up to three properties in a period of 45 calendar days, or apply the rule of 200%.
Period of 180 days to complete the transaction: The time limit for the closure is 180 days from the beginning of the process, i.e. it includes the period of identification.
Use of intermediary: You must use a "Intermediary" or "Opener" to manage the transaction.
Same Owner in the Title: The owner that sells must be the same owner that purchase was not allow owners with fractional interests.
Defer 100% of the Tax: re-invest absolutely all the cash in the new purchase and ownership to purchase must be of equal or greater value.
To the extent that any of these rules (see above) have been raped may be determined fiscal responsibility to the person who run the Exchange. In any case, if the property to acquire has a lower purchase price, it will not be a fiscal responsibility. To the extent that not all equity moves of the waiver of the replacement property, will not be tax deductible. It is important to highlight that not always an Exchange 1031 is of benefit to the investor, in particular for commercial properties, which receive the benefit of cost recovery through depreciation. I conclude my pastern with the Council of always, see, see and see....., especially when it comes to these issues of taxs, use the services of a specialized counter in the theme to guide you and you helped determine which will be the best way to go.
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