1031 In a Nutshell
What is a 1031 Exchange?
People ask, “Why should I do a 1031 exchange?” I can answer this question in two words: "Financial Leveraging." By doing a 1031 exchange, the taxes you would have paid to the government are now working to earn you money.
A 1031 exchange allows a taxpayer to postpone their long-term capital gains tax when selling an investment property by exchanging both the basis and the gain into a new investment property. This gives an investor financial leverage. If you have a property used for investment or business and you plan on buying another property used for investment or business, then yes, you need to do a 1031 exchange.
It doesn’t matter what the long-term capital gains tax is at the time. Why pay more taxes when you don’t have to? Even the IRS agrees! That’s why they created a 1031 tax code. It doesn’t make sense to tax an investor on money they never actually received. And why not encourage investors to reinvest in the American real estate market? It is a Win-Win for everyone.
...Even the IRS agrees! That’s why they created §1031...!
Does the property I own qualify for a 1031 exchange?
There are five types, or ‘tax classes,’ of property:
- Property used in a trade or business
- Property held for investment
- Property used as a vacation home
- Property held primarily for sale
- Property used as your primary residence
Properties that fall into the first three categories qualify for a 1031 exchange. Keep in mind that vacation homes used solely for personal use do not qualify; only those vacation homes that are being used as rentals for the majority of the year qualify. “Fix-and-flippers” beware: properties held for the sole purpose of selling them in the immediate future will not qualify for a 1031 exchange. 1031 exchanges are not designed for Dealers, Developers or Fix-and-Flippers. And no, you cannot 1031 your primary residence, unless you make it a rental for one year and one day before you sell. Then you not only get the tax benefits of selling a primary residence, but section 1031 as well! You get TWO tax advantages in one sale!
The 1031 Exchange “B.A.S.I.C.S.”
Begin by getting a contract on your investment property
Ask to speak with a consultant here at The 1031 Exchange Experts
Send us your Title Company information
Inform your Realtor®
Contact your CPA let them know what you are doing
Sit back and let us do the work!
Our 1031 consultants and coordinators will work closely with you, your Title Company, your Realtor, and your CPA to make sure that you not only get the real deal, but the best customer service in the industry. We don’t mess around with your money or your time. We guarantee that you get segregated accounts (not just ‘segregated accounting’), and we won’t let you miss your 45- or 180-day deadlines.
We’ve got your back from start to finish. And here’s the best part: The 1031 Exchange Experts is owned by Gary Gorman, author of “Exchanging Up!” and the “Six Things You Need To Know About 1031 Exchanges.” Not only do we hold ourselves to the highest standard, but the industry does as well. After all, we... ‘Wrote the book on 1031 exchanges!’
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