News For This Month: Taxes

Some Things to be Aware of the 1031 Exchanges Some investors have been wise to such tax benefits of 1031 exchanges for a number of years. Also, there are those who are only new to the game and they also wonder what this is about. They would hear realtors, investors, attorneys and others mention such but they are certainly not very clear on what the process actually includes. The 1031 exchange would permit the investor to swap such business or the investment asset for another one. Under a normal situation, the sale of such assets would have tax liability on capital gains. However, if you meet the requirements found in section 1031 of the IRS tax code, then you can actually defer the capital gains tax. But, it is really important to note that the 1031 exchange is not a tax avoidance scheme. When you would sell the investment asset or the business and you won’t replace this with another property, then you will pay for the capital gains taxes. There are really many things that you may not understand with the 1031 exchange and such is the reason why it is wise to ask for help from the professional who is experience with such transactions. You are also curious about the basics and here are things that you should know before you would try such 1031 exchange.
The 10 Best Resources For Exchanges
Keep in mind that such is not for personal use. Though it can be tempting to consider trading up the primary residence and also avoiding capital gains liability, the 1031 is just available for property held for business or the such investment use.
The 10 Best Resources For Exchanges
You must also be aware of the exceptions to the personal use prohibition. Just like most things in the IRS code, there are also exceptions to the rule. The personal residences don’t qualify, you can also successfully exchange the personal property like the interest in a piece of artwork or tenancy-in-common. You have to remember too that the exchanged property must be like-kind. This is actually an area that would sometimes confuse the new investors. The term like-kind doesn’t actually mean exactly similar but this means that such exchanged properties should be the same in use and scope. IRS rules can be liberal but there are various pitfalls for those who aren’t very careful. You must also remember that the exchanges don’t actually happen concurrently. One really important benefit is that you can sell the current property and have around six months to close the acquisition of such like-kind replacement property. This is actually called a delayed exchange. When you want to complete such exchange, then you will need the help of an intermediary who is qualified.

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