An IRS Section 1031 Exchange allows investors to sell business or rental property and purchase a “like kind” property and not pay taxes on the capital gains from the sale provided one follows certain rules and regulations required by the IRS.
Briefly the requirements are:
Briefly the requirements are:
- All of the net proceeds from the sale of the first property goes towards the purchase price of the replacement property in order to defer taxes.
- The net proceeds of the sale must be deposited with a QI (qualified intermediary) that holds these funds in trust until a new purchase property can be located and specifically identified.
- The net purchase price of the new property must be equal to or greater than the net sales price of the property just sold.
- 45 day timeline: the parties have 45 days as of the close of escrow of the first property to find and identify a replacement property to purchase. You then have 180 days in which to close escrow on the replacement property.
- This process can be repeated almost in perpetuity as one can upgrade investment properties over the years, and defer paying capital gains taxes in this manner.
The 1031 Tax Deferred Exchange is a nifty tool to help investors build wealth and save taxes.
Here’s a link to a Qualified Intermediary company we are familiar with that has an excellent reputation in Santa Clara and Santa Cruz Counties …
Ron Ricard
877-747-7875
Please phone us at 831.515.3009 for a consultation regarding your income property investment goals and how you can upgrade to a new property while deferring capital gains tax.
