A 1031 exchange is a beneficial tool that can result in huge tax savings on the sale of real property. But many taxpayers aren’t aware of the inner workings of a 1031 exchange. This article will act as a beginner’s guide to the world of 1031 exchanges.
A 1031 exchange let’s you defer your capital gains taxes on the sale of real estate. The catch is you have to reinvest all of your sales proceeds into a new replacement property that is equal to or greater than your relinquished property in terms of value, equity, and debt.
Before you can even think about doing a 1031 exchange, you need to make sure you are satisfying the holding requirements set out in section 1031 of the Internal Revenue Code. 1031 exchanges are restricted to real estate held for investment or business purposes. You cannot do a 1031 exchange of a property that you hold primarily for personal use.
Once you begin a 1031 exchange you only have a limited time to complete the process. After you sell your relinquished property, you have 180 days in total to finish your exchange. The first 45 of those days are your identification period in which you need to identify in writing the property you intend to exchange into.
Qualified Intermediaries You Can Trust
At Commercial Partners Exchange Company, we offer qualified intermediary services to taxpayers all across the country. With more than twenty years of experience at our backs, we have the skills and expertise needed to facilitate your 1031 exchange. We can prepare all of your 1031 documents, answer all of your questions, and advise you every step of the way. Contact us today at our downtown Minneapolis office to learn more about our services and to set up a time to chat about the details of your 1031 exchange.