2006-12-09 08:17:27 · 5 answers · asked by Rachel T. 2 in Business & Finance ➔ Renting & Real Estate
The question was answered above. Just a word of advice. If you do one of these, make sure that before you sell the initial property you already have about 3-4 others that you know are available for you to purchase. There is a time stipulation on these. You have to identify your second property specifically within 45 days of the closing of the initial sale and close on this property within 6 months. It gets even more difficult if you a selling one but buying 2 or 3 to exchange.The law is very strict but is a real estate investment perk that should not be passed up.
2006-12-09 09:57:37 · answer #1 · answered by Val 2 · 0⤊ 0⤋
If you make an investment and sell it, you'd normally pay capital gains on the profit from that investment. However, if you make another investment in a 'like kind' of asset, then the gains are deferred until you sell the second investment.
1031 Exchange laws have some unusual rules, so contact a lawyer to determine what you need to do to qualify for a 1031 exchange. Wiki has a good summary.
(for instance selling male cows and reinvesting in female cows does NOT qualify for a 1031 exchange...... because their not 'like kind').
You DO NOT have to identify the new investment before you sell the old investment.
Be careful about what other posters (and myself) tell you. Always use a lawyer.
1031 SEQUENCE
1) An investor decides to sell investment property and do a 1031 exchange. He contacts a qualified intermediary (QI).
2) The investment property is put on the market.
3) An offer to purchase the investment property is accepted.
4) Escrow for the sale is opened, and a preliminary title report is produced.
5) The QI sends required exchange documents to the escrow closer for signing at property closing.
6) Escrow closes.
7) Within the first 45 days after the close of escrow on the sale of the relinquished property, the investor identifies replacement property as required by law. This is known as the "Identification Period".
8) Within 180 days after the close of escrow on the sale of the relinquished property, the investor closes on the replacement property that he identified. This is called the "Exchange Period". This completes the exchange.
2006-12-09 20:08:22 · answer #2 · answered by greebyc 3 · 0⤊ 0⤋
It is actually deferment of taxes on the exchange. You must exchange like kind. Like kind means house for land, house or commercial. I believe you can buy up to 3 with 1 sale. You must use all proceeds from the sale on the new properties. When you do this, taxes are deferred. You MUST identify the properties and your intention of doing this BEFORE the sale of your current property.
My 1031 company in AZ is
http://www.naexchange.com
2006-12-09 16:27:42 · answer #3 · answered by homes_az 2 · 0⤊ 0⤋
If you're interested in buying duplexes or other investment properties in Spokane Washington, I currently have a few investment properties you might take a look at on my website www.showcasespokane.com. We might work out a 1031 Exchange for you.
2006-12-09 17:10:48 · answer #4 · answered by paul G 1 · 0⤊ 0⤋
When you exchange one piece of investment property for another instead of "selling". You do not have to pay taxes on the exchange.
2006-12-09 16:21:42 · answer #5 · answered by Anonymous · 0⤊ 0⤋