Most sellers of highly appreciated real estate find great value in utilizing I.R.C § 1031 Exchanges to defer capital gains taxes and depreciation recapture, but there are circumstances where an alternative tax-deferral structure would be helpful, or more appropriate.Read More
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What starts the clock?
In an I.R.C § 1031 Exchange, there are two key time frames that must be at the forefront of your mind from the beginning. The first is the “Identification Period,” which is defined as beginning on the date the taxpayer transfers the relinquished property and ending at midnight on the 45thcalendar day thereafter. This officially begins on the day when the deed or other transfer document is recorded. In some cases tax payers will try to extend the 45/180 day period by delaying the recording of the deed. This is precarious and may not hold weight if reviewed as the ownership of real property (necessary in a 1031 exchange) is transferred upon the transfer of “benefits and burdens” of ownership, which is typically viewed as the when the deed is conveyed.Read More
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Internal Revenue Code 1031 tax deferred exchanges can be challenging to understand, leaving the taxpayer with more questions than answers. What follows is a suggested series of steps from a qualified intermediary of fifteen years, including the basic rules of a forward 1031 exchange.Read More
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“I’d love to take advantage of the benefits of a 1031 exchange but my partners want to cash out, is there anything I can do?”Read More
Every taxpayer’s situation is unique and therefore every 1031 exchange is individually nuanced. Despite the innate differences in every potential exchange, a pattern has emerged as to the most common reasons that an individual will move forward and utilize a 1031 exchange. Below are the top ten reasons we’ve found that have motivated taxpayers to move forward.
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.Read More
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.Read More
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.Read More
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Long thought of as the retirement capital of the United States, Florida is reinventing itself as the new national destination for real estate investment. According to a February 2018 Forbes article, “Best Buy Cities: Where to Invest in Housing in 2018” by Samantha Sharf, Orlando is ranked first in the country for value in real estate investment. Sharf and the team at Forbes highlight Orlando’s 7.1% job growth over the last two years as well as the 7.6% population growth over the past three years as strong factors in addition to their Local Market Monitor’s speculation that the prices of homes in Orlando could increase another 35% by 2021. With Orlando’s average home value still sitting roughly 22% below the national average, the opportunity for first-time and long-time investors to build or expand their portfolio has never been better.Read More
President Trump signed into law the Tax Cut and Jobs Act taking effect January 1, 2018, changing the 1031 tax deferred exchanges that were first imposed in 1921. The major change to the 1031 code is the removal of tax deferral treatment for tangible and intangible personal property, including assets such as collectible cars, aircraft, gold and silver bullion, equipment, cars and trucks, franchise fees and licenses. Tax deferred exchanges for real property were maintained.Read More