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

1031 Tax Deferred Exchange Economies of Scale

Posted by Andy Gustafson on Tue, Dec 04, 2012

Given the asset sale is a taxable event and the taxpayer’s intent is to replace with a like-kind asset, a 1031 tax deferred exchange results in the efficient use of the dollar through economies of scale. Maximizing the marginal use of the dollar is the core principle in a 1031 tax deferred exchange, rather than paying the capital gain tax. Economies of scale is a microeconomics term used to describe reductions in unit cost as other cost contributing factors decrease. Relative to a 1031 exchange, the cost of capital decreases as the return on capital may increase over time.

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Tags: 1031 tax deferred exchange

1031 Exchange Guidelines

Posted by Andy Gustafson on Thu, Apr 19, 2012

As a general rule, anytime you sell property, the gain you receive as a result of the sale is subject to capital gains taxes. For example, if you purchased a property five years ago for $100,000 and now wish to sell it for $150,000, you would be subject to paying capital gains taxes on the gain of $50,000. One strategy that allows you to defer capital gains is to enter into a 1031 Exchange. Section 1031 of the Internal Revenue Code can provide an effective mechanism for deferring the payment of payment of capital gains taxes if the 1031 exchange guidelines are followed.

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Tags: 1031 tax deferred exchange, 1031 rules and guidelines, 1031 exchange requirements

1031 Exchange Definition

Posted by Andy Gustafson on Thu, Jan 12, 2012

For those not familiar or a bit rusty, this article looks at the 1031 exchange definition including what, when, why and how of Internal Revenue Code (IRC) Section 1031 tax deferred exchanges. The Internal Revenue Service refers to 1031 exchanges as tax-free exchanges because the outcome in the year a 1031 exchange concludes is that no gain or loss is recognized meaning that no tax is paid.

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Tags: 1031 tax deferred exchange, 1031, 1031 exchange

Why Defer Capital Gains

Posted by Andy Gustafson on Tue, Sep 06, 2011

When selling a capital asset, it is critical to include the tax consequences of the transaction in the decision making process. Three taxes are typically triggered when a capital asset is sold including federal and state capital gain and recaptured depreciation. These taxes can represent upwards of 40% of the sales price and more if the asset is held less than one year. Such states as Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming do not have a state capital gains tax but federal capital gain and recaptured depreciation taxes will still apply to the sale. A 1031 exchange allows deferring the above-mentioned taxes until the sale of the replacement property.

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Tags: 1031 tax deferred exchange, capital gains

Timber Rights: Why a Tax Deferred Exchange Matters

Posted by Andy Gustafson on Thu, Jul 14, 2011

Timberland owners often engage in tax deferred exchanges to save funds for higher yield acquisitions. Along with timberland, timber rights held for either business use or investment can also be exchanged and capital gains deferred for real property given proper conditions. Timber rights holders willing to maximize their benefits through such exchanges should pay close attention to state regulations and transaction structures in terms of cutting time and timber quantity limits.

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Tags: Timberland, 1031 tax deferred exchange, timber rights

New Law to Regulate 1031 Qualified Intermediaries

Posted by Andy Gustafson on Thu, Aug 12, 2010

The Consumer Financial Protection Act of 2010(CFPA) was recently signed into law that will provide regulation for Qualified Intermediaries (QI) of 1031 tax deferred exchanges. The Federation of Exchange Accommodators (FEA) is a trade association representing companies whose primary business is acting as QIs for 1031 exchanges. The FEA will work with the Consumer Financial Protection Bureau to draft regulations. In 2007, the FEA had asked the Federal Trade Commission to govern QI’s but the Commission declined citing the burden of oversight exceeded the benefits.

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Tags: 1031 tax deferred exchange, qualified intermediary

New Hampshire SB 483 and 1031 Exchange

Posted by Andy Gustafson on Wed, Jul 14, 2010

Recently, the New Hampshire Governor signed Senate Bill 483 into state law. This is a significant event in the 1031 exchange world especially as states look for revenue generating sources. 

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Tags: 1031 tax deferred exchange, 1031 exchange, reverse 1031 exchange

Make Vacation Property 1031 Exchange Eligible

Posted by Andy Gustafson on Thu, Jun 17, 2010

Effective March 10, 2008, the Internal Revenue Service (IRS) instituted Revenue Procedure 2008-16 providing clarification when a vacation home is and is not eligible for 1031 consideration. For years this was a gray area. Unfortunately, without the IRS guidance, the rules were subject to interpretation which led to abuse.

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Tags: 1031 tax deferred exchange, 1031 Vacation property, 1031 exchange

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