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The Basics Of 1031 Exchanges

Thursday , 16, April 2020 Comments Off on The Basics Of 1031 Exchanges

1031 exchanges, which have long been used by smart real estate investors, have become an important tool for large-scale real estate consumers. 1031 replacements are permitted under Part 1031 of the United States Internal Revenue Code.

You should always consult with a professional 1031 exchange attorney or accountant to determine whether or how to use the 1031 exchange.

– This type of exchange is deferred for tax purposes and not a tax-free investment.

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– A similar type is defined as real estate, also referred to as real estate. Properties that qualify are described in Code 1031. Some types of excluded are; Assets mainly held for sale, inventory, stocks, bonds or banknotes, securities, shares in companies and certificates of trust. Private residences are not eligible.

– Property must be used for the appropriate purpose. Both assigned property and assigned property must be stored for use in trade, business or investment.

– Real estate must be exchanged and not sold to get money.

– Most 1031 exchanges are supported by qualified brokers who help taxpayers meet the IRS requirements of article 1031.

-The value of the replacement property must be equal to or greater than the value of the property transferred.

– Capital in substitute property must be equal to or greater than equity in the foreclosed property.

– Debt to the replacement property must be equal to or greater than debt to the transferred property.

– All net proceeds from the sale of the transferred property must be used to purchase a replacement property.

– Exchange 1031 ends when the taxpayer controls the yield of the foreclosed property.