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1031 Exchanges

1031exchange — Wed, 22 Apr 2009 03:27:08 CDT

Real Estate Investors Be Careful When Making 1031 Exchanges Outside of the U.S.

Use A 1031 Exchange When Selling Classic Cars

Classic Car Investors - There's a Better Way to Sell

What Property Investors Should Know About Closing Expenses On 1031 Exchanges

Ways To Avoid Paying Your Capital Gains Taxes

Exchange Your Debt With A 1031 Tax Exchange

IRC Section 1031 Transactions Keeping Your Money Working For You

IRC Section 1031 Transactions - Keeping Your Money Working For You

1031exchange — Wed, 22 Apr 2009 03:26:21 CDT

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Ways To Avoid Paying Your Capital Gains Taxes

1031exchange — Thu, 02 Apr 2009 00:03:54 CDT

There are a lot of investors that end up making the mistake of selling their business or investment property but have to pay thousands of dollars in capital gains taxes to the IRS. What they may not know that there are tax laws that provide them the ability to defer all of the capital gains taxes on the sale of property which has been held as a trade or business - thereby retaining their gain.

This law defers (and can even eliminate the capital gains taxes) you would typically need to pay when selling business or investment property. The money that is made on the sale of your business or investment property, must also be used only to purchase another "like-kind".

When you take advantage of the 1031 exchange laws, you can save a lot of money, thereby allowing you to leverage your equity by purchasing even more property (which may have not been possible without the added tax savings).

The 1031 Exchange provision has saved investors millions and millions of dollars, and it is well worth your time to explore the benefits of it for yourself. In order to reap those rewards, there are some specific procedures you need to follow.

First, it?s important for you to choose a well respected and professional qualified intermediary also known as a "Q.I.". Dealing exclusively with doing 1031 exchanges, a Qualified Intermediary is an expert with the facilitation of such a deal.

Your Q.I. provides a written agreement to change the transfer from and outright sale to an "Exchange" then transfers your relinquished property (that you are selling) and takes that money and uses it to purchase your replacement property on your behalf.

To qualify for your exchange, you will need to follow these rules:

1. Firstly, the investment property that you are replacing must have been used for investment purposes or use in a trade or business and must be "like-kind" (i.e. US real estate for other US real state).

2. Second, you must find a replacement property if you haven?t already, clearly identify it in writing to your Q.I. it within 45 days. It is necessary to close on the sale on the replacement property within one 180 days.

3. In order to defer all of the taxes, all your money made in that sale must be used to purchase the new replacement property.

Follow these 1031 rules and you will be in the best position to faciliate your exchange. The steps are very simple and even if the road along the way gets a little complicated, in the end it will put a big smile on your face. Do something good for yourself by retaining your capital gains with a 1031 Tax Exchange!

United States investors can save a lot of money by using 1031 exchange to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange is similar to an interest free loan from Uncle Sam.

Watch the video on 1031 exchange rules to learn more.

Exchange Your Debt With A 1031 Tax Exchange

1031exchange — Wed, 01 Apr 2009 02:38:51 CDT

The basic premise behind a 1031 exchange is that that you, the taxpayer, are shifting all of your equity from one property to the next. In effect, the old debt is being offset by the new debt on the replacement property. However, there are two ways to usurp this premise and cash out some of your equity: pre-exchange refinancing, and post-exchange refinancing. Pre-exchange financing will be discussed first.

To keep in line with the 1031 rationale, all of the proceeds from the sale are supposed to pass to the qualified intermediary - this prevents you from receiving any cash benefit from the sale. But, suppose you want that new car or want to take the family on a vacation and don't have the cash to do it. So, you decide to refinance your property shortly before the 1031 exchange and use that equity for your desired luxury item. A smart move? Probably not, according to IRS v. Garcia.

Garcia was a taxpayer who decided to refinance his property in anticipation of the 1031 exchange. The IRS successfully argued that when Garcia took out money before the 1031, it was akin to telling the settlement agent to pay him some of the sale proceeds at closing. In short, you cannot take out your equity just before the 1031 exchange. Cashing out equity, called "boot," is acceptable if you pay taxes on it. Garcia tried to avoid the tax and ran afoul of the 1031 rationale, and the IRS.

The other way of recovering funds via refinancing is the Post 1031 Exchange Finance on the replacement property. This is a good way for you to take some of that equity out of the replacement property and buy more real estate. There is a question, however, on how long you have to wait before the refinancing after the 1031 Exchange is completed.

There is debate on how long one must wait after the 1031 exchange to show the IRS, through the closing statement, that you have invested all of your equity into the replacement property. Some say wait a nanosecond to establish a separate transaction and a new settlement statement to show that the replacement property was encumbered with new debt via a loan or a mortgage. Once this is established, there is a cash payment from the lender to you. Essentially, you have tapped into a pool of money made available through the 1031 exchange.

The legality of the nanosecond exchange is debatable. There are risks because there is no definitive IRS rule regarding how long you are to keep the equity in the replacement property. A more prudent approach would be to keep the money in the replacement property in order to avoid the Garcia trap. In this case, keep the equity in the replacement property until the following tax year or until two years have passed from the 1031 exchange to the ultimate finance.

Investors in the U.S. can save big money by utilizing a 1031 exchange to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange is similar to an interest free loan from the IRS.

What Property Investors Should Know About Closing Expenses On 1031 Exchanges

1031exchange — Fri, 13 Feb 2009 00:40:02 CST

There are many expenses involved in the closing of a sale on real estate. There are the standard operating expenses, such as your agent's commission and the recording of the deed, which siphon money out of your proceeds and appear on the closing statement, but there are also the various oddball expenses that arise during the proceedings, some common examples of which are rent proration and security deposits.

Any proceeds or cash benefits you receive from a 1031 transaction are known as boot. Boot is not part of a like-kind exchange, and is therefore considered taxable.Closing on a sale will always carry associated costs such as agents' commissions and deed recording fees. It is acceptable to debit these off on your closing statement, because they do not represent any extra cash benefits for you. Expenses such as prorated rent and security deposits that must be transferred to the new owner are another story.

The correct way to deal with these is to write the owner a check from your own operating account. Debiting these expenses to your closing statement would result in a cash benefit in that money in your operating account would be freed for your use, and this money is considered to be boot.

In the process of a 1031 exchange, you will also face expenses related to the acquisition of new debt on your replacement property. Loan origination fees, underwriting fees, and processing fees are not part of a like-kind exchange and the money must come out of your own property.

The message you should take away from this article is that it is best to simply pay these kinds of expenses out of your own account rather than making a risky attempt to walk out of a 1031 exchange with extra cash in your pocket. The IRS has pursued litigation against investors who have tried these kinds of tactics, one notable example being the case of the Commissioner v. Garcia.

United States property investors can save their money by using a 1031 exchange to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange is similar to an interest free loan from Uncle Sam!

Classic Car Investors - There's a Better Way to Sell

1031exchange — Tue, 27 Jan 2009 05:27:48 CST

If your investments lie in personal property such as collectible cars or other antiques, you may wonder whether the power of section 1031 can somehow be used to your advantage, and rightfully so, as the sale of collectible property incurs a whopping 28% capital gains liability. Luckily, the answer is yes; though not many are aware of the possibility, 1031 can be made on certain types of personal property, including classic cars, and in light of capital gains rates, those with money in these kinds of investments stand to benefit greatly from the use of section 1031.

The answer to your dilemma is a 1031 exchange, a tactic which, although extensively used by real estate investors, has not as of yet become a common gambit of those dealing in antiques and collectibles such as classic cars. This is unfortunate, because the capital gains rates associated with sales on these investments are, as I mentioned before, much higher than those on real estate transactions, so a 1031 tax deferment would confer the greatest benefit on those in your line of business.

If this has changed your mind about selling your classic car investment up front, you should be aware of one key difference between a real estate exchange and a personal property exchange: in your case, the like-kind requirements will be more stringent, so your car must be exchanged for another car of equal or greater value; you cannot exchange, for example, a car for an airplane or a tractor.

You'd be right, but you'd do well to consider the possibility of a 1031 exchange. A 28% capital gains tax represents a large portion of your profits, and if you're like me, you'll take the option that allows you to reinvest that money, maximizing your potential profits.

United States investors can save their money by utilizing a 1031 exchange to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange is similar to an interest free loan from Uncle Sam!

Use A 1031 Exchange When Selling Classic Cars

1031exchange — Sat, 27 Sep 2008 03:39:41 CDT

Classic cars have appreciated tremendously in value in recent days, and they are in high demand. Your first inclination may be to sell your car outright and cash in on your investment, but a look at the capital gains tax rates might change your mind.

The rates for the sale of collectible property are much higher than those on the sale of real estate. So, is there any way to avoid paying inflated capital gains rates on the sale of your collector car? The answer is to make a 1031 exchange. This is a tactic that is often used by real estate investors, but that can be particularly helpful in the sale of collectible property.

Imagine, for example, that you have a 1967 Ferrari that you bought for $270,000 but which has since appreciated in value to $800,000. At this point, you're likely quite pleased with your investment. But you might balk at the 28 percent capital gains rate on the sale of this car, and you'd be right to do so, because a 1031 exchange could save you that 28 percent and let you reinvest that money instead of losing it to taxes.

In this sort of situation, a 1031 exchange is a very good idea, but you must keep in mind that the requirements for like-kind exchanges on personal property are much more stringent than the like-kind requirements for real estate. This means that if you have a car, you can only exchange it for another car, not a crane or a backhoe. In addition, your car must be held for the purpose of investment or business, as must your replacement.

With the demand for collector cars at an all time high, how can you afford to lose that 28% of your profits? The smart collector will opt to make a 1031 exchange instead of paying the exorbitant capital gains rates.

Now is the time to reap the benefits of your collectible car investment, but why sell outright and watch 28% of your profits go down the drain? A 1031 exchange gives you the opportunity to put the money that would have been lost to capital gains taxes towards a new investment, keeping your money working for you.

United States property investors can save a lot of money by using a 1031 exchange to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange is almost like getting an interest free loan from Uncle Sam!

1031 Tax Exchange Information

1031exchange — Fri, 05 Sep 2008 04:01:50 CDT

Property Exchange 1031

1031 Tax Exchange Services

Reverse 1031 Exchange

1031 Real Estate Exchange

Tax Deferred 1031

1031 Starker Exchange

Build to Suite Exchange

1031 Exchange Rule

1031 Exchange Requirements

What Is A 1031 Exchange?

1031 Exchange Services

1031 Tax Exchanges

1031 Blog

1031 Intermediary

Real Estate Investors Be Careful When Making 1031 Exchanges Outside of the U.S.

1031exchange — Fri, 05 Sep 2008 03:52:58 CDT

As a real estate investor, you probably are aware of the advantages of a 1031 exchange over outright sale of a property. An exchange defers your capital gains taxes, keeps your money working for you, and helps to build equity and maximize your returns. But 1031 exchanges are allowed not only for the good of the investor; by allowing investors to move their capital to the most advantageous investments, section 1031 stimulates the U.S. economy.

The fact that 1031 exchanges are intended to boost the U.S. economy raises the question of whether one can exchange a property for one located overseas. The short answer is no. The money you save by making a 1031 exchange rather than selling outright is considered a tax deferment, which means that although you are temporarily liberated from capital gains taxes, the U.S. government will still want to collect the money if you sell your property at some point in the future. It is difficult and sometimes impossible for the IRS to collect taxes on the sale of foreign property.

In private letter rulings relating to the U.S. Virgin Islands, the IRS has ruled that a property must be income-producing in order to meet like-kind requirements. This is a more constricted definition of a like-kind exchange than that which is normally applied to exchanges made on properties in the United States, which merely requires that your property be held for the purpose of business, trade or investment.

So if you are planning on exchanging a U.S. property for one located outside of the fifty states (plus Washington D.C.), you would be wise to take a second look at the legal precedents involved to ensure that the property will satisfy all like kind requirements, and if you are uncertain, it might be idea good idea to request a private letter ruling on your particular case.

United States investors can save a lot of money by utilizing a 1031 exchange to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange is similar to an interest free loan from Uncle Sam!