Understanding The Concept Of 1031 Exchange
Property investment highly benefits from the 1031 exchange program It presents to them huge tax benefits. There are many people who are ignorant about this program that is provided by IRS.
It is meant to shield you from paying capital gains in case you sell your investment to replace it with similar investment. The law requires one to submit tax for any gains made by selling real property.
One should not exploit this 1031 program to fail to remit the necessary tax. In case you sell your property and fail to replace it with the same type of property, you will be liable for capital gains tax. To qualify for this kind of benefit, you should ensure that you follow the set rules and regulations. sale of property held for personal use cannot benefit from this program. 1031 exchange is meant for business property only.
Overwhelmed by the Complexity of Resources? This May Help
The investment that you want to replace with must not be the same as the one you are disposing of, but it should have the same use.
If You Think You Understand Options, Then This Might Change Your Mind
1031 the exchange gives you time to locate a replacement and make the necessary adjustments before you close the deal. The money you generate from the sale of a property is held by a legally authorized intermediary which will buy a new property of your choice when you have consented.
You must identify a replacement within 45 days to be a beneficiary of this program. You must close the replacement deal within 180 days failure to which your capital gains will be taxed.
There are numerous companies dealing with 1031 exchange. You only have to access their websites to get the services that you need. You should get engage an accredited company. Ensure that you have a well-drafted contract document which you then forward to the exchange company. Properly drafted documents are submitted to an attorney by the company for legal processing.
You should contact a company that is known for acting with speed and proven in quality assurance when closing exchange deal.
Before selling your property, it is advisable to get a legal opinion from an attorney who understands 1031 exchange. 1031 is a very beneficial program as you save on tax deductions. The law treats the exchange of the investment as a continuation of the relinquished one.
Demand to see the license of the company before you get into a contract. You should verify that the company has complied with all 1031 exchange rules.
Check their ratings on their website. Good ratings are a testimony that the company is efficient in its customer service. You should ensure that you and the company are the signatories of the account where money is deposited to avoid being conned.