The 1031 Exchange Blog

1031 Exchange First Time Exchangor Misconceptions

Posted by Andy Gustafson on Wed, Mar 21, 2018

For the uninformed, 1031 exchanges can be confusing, yet for those who have initiated them, they are an effective strategy to defer the federal and state capital gain and depreciation recapture. Some believe that all that is needed is for someone to hold the exchange funds. Nothing could be farther from the truth. If that is what you are being told you are potentially headed for trouble.

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Tags: 1031 rules and guidelines, 1031 exchange definition, 1031 exchange rules irs, 1031, 1031 exchange rules, 1031 exchange, California 1031 Exchange

1031 Exchanges Involving Multiple Properties

Posted by Tom Gustafson on Wed, Mar 14, 2018

If you are a tenured investor who has built a portfolio of diverse properties, a 1031 exchange is an exceptional tool to assist in continuing to add to, diversify or consolidate your holdings. A common misconception exists around 1031 exchanges that a single investment property must be exchanged for a single like kind investment property. This is incorrect.  In fact, the ability to trade a single investment property for multiple properties, or in reverse; multiple properties for a single property gives the savvy investor the flexibility to adjust their portfolio according to their needs.

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Tags: 1031 tax deferred exchange, 1031 tax exchange, 1031, 1031 exchange rules, 1031 exchange, 1031 property, 1013 multiple properties

Hold Time is One of Many Facts Supporting a 1031 Exchange

Posted by Andy Gustafson on Wed, Mar 07, 2018

One of the many questions that people ask a Qualified Intermediary of 1031 tax deferred exchanges is how long the relinquished property needs to be held to qualify for a 1031 exchange? The answer represents one of many ways to develop a fact pattern that supports a 1031 exchange. As you recall, a 1031 exchange allows the taxpayer to defer or postpone the payment of federal and state capital gains and depreciation recapture taxes, when real property held for the production of income for a business or investment is replaced with real property of equal or greater value than the relinquished property's net sales price. What is not eligible for tax deferral treatment is a primary residence, Section 121 transaction, or second home.

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Tags: 1031 rules and guidelines, 1031 exchange explained, 1031 exchange requirements, 1031 exchange rules irs, 1031 Exchange Rules California, 1031, 1031 exchanges, 1031 exchange rules, 1031 exchange, like-kind exchange, 1031 Hold Time

Four Key 1031 Exchange Rules

Posted by Andy Gustafson on Thu, Feb 20, 2014

When taxpayers ask what they should know about a 1031 exchange, I suggest reading this brief article to attempt to cover four key target areas that match up with the characteristics of their transaction. Every 1031 exchange is different though they are all either a forward or reverse exchange, meaning that the old property is sold before the new or in a reverse, the new is acquired before the old is sold with both types of exchanges completed within 180 calendar days. They also share the goal of deferring the capital gain though partial 1031 exchanges may be the desired outcome when not all the exchange proceeds or debt retired is replaced. When you think all bases are covered, there are the exceptions to the rules that are reviewed given the taxpayer’s 1031 exchange specifics.

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Tags: 1031 exchange rules

1031 Exchange Rules in 2014

Posted by Andy Gustafson on Thu, Jan 30, 2014

Smart investors and business owners utilize a 1031 exchange when selling and replacing real and personal property held in the productive use of a business or for investment. The alternative to a 1031 exchange is to pay the federal and state capital gains and depreciation recapture tax, which can represent upwards of 40 percent of the property sales price. A 1031 exchange allows the taxpayer to use those otherwise paid dollars towards the replacement property purchase. If the 1031 exchange rules are not strictly followed, the outcome can be a disqualification, tax payment, interest on the tax not paid, penalty and drama of an IRS audit.

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Tags: 1031 exchange rules

1031 Exchange and Divorce

Posted by Andy Gustafson on Thu, Jan 09, 2014

Husband and wife or domestic partner acquire an investment property in a 1031 exchange and in a divorce decree the partner receives the property. Years later, the partner wishes to sell the property. Does a 1031 exchange make sense? It depends upon the tax consequence and whether the partner’s intent is to replace with an investment property.

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Tags: 1031 exchange rules

Two Party 1031 Exchange

Posted by Andy Gustafson on Mon, Oct 07, 2013

In a two party 1031 exchange, the taxpayer conveys the relinquished or old property to the buyer and the replacement property is conveyed from the buyer to the taxpayer. These types of exchanges are somewhat rare, given the likelihood that the taxpayer and the buyer want each other’s property. Properties are almost never the same value; consequently the taxpayer may pay tax on that portion of cash or retired debt that is not replaced. Nonetheless, these transactions do qualify as 1031 exchanges and do not require a qualified intermediary to accommodate the two party 1031 exchange.

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Tags: 1031 exchange rules

Four 1031 Exchange Rules

Posted by Andy Gustafson on Mon, Jul 01, 2013

Understanding and following 1031 exchange rules is critical when initiating an Internal Revenue Code Section 1031 tax deferred exchange. Seek the services of a Certified Exchange Specialist© whose designation provides the assurance the taxpayer is benefiting from a 1031 expert who is subject to a strict Code of Ethics and Conduct Preamble.

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Tags: 1031 exchange rules

1031 Exchange Rules

Posted by Andy Gustafson on Thu, May 23, 2013

If the government agreed to loan you money and not charge you interest, would you take it? For the smart investor following 1031 exchange rules, the answer is absolutely! This is essentially what the government (Treasury Department and Internal Revenue Service) is doing by allowing taxpayers to defer the payment of capital gains tax after certain transactions, known as the 1031 tax exchange. Completing a 1031 tax exchange is a great way to parlay a taxpayer's capital gains, but there are plenty of rules to follow in order to do so.

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Tags: 1031 exchange rules

1031 Exchange Rules Aid Property Acquisition

Posted by Andy Gustafson on Tue, Mar 19, 2013

Understanding the 1031 exchange rules is critical for those in the farming business, own business aircraft, an apartment complex, single family investment, land, or who own in any type of business equipment, the chances are that there will come a point in time when a decision will be made to exchange or upgrade company assets. Business owners and CEOs who find themselves in this position should consider a 1031 exchange instead of a traditional sale the next time they prepare for such an acquisition because under these conditions, they will be able to complete the sale while at the same time, defer the 25 percent recaptured depreciation tax that will have been triggered on the sale. While the idea of such a transaction offers clear benefits, there are certain 1031 exchange rules which must be followed in order to keep the process smooth while keeping it out of the crosshairs of the IRS.

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Tags: 1031 exchange explained, 1031 exchange rules

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