What Is a Three-Party Exchange?
The 1031 exchange often comes with two big challenges: following the timeframes and finding the “goldilocks property.” An exchange typically refers to a trade between two parties, but this isn’t always feasible.
Delaware Statutory Trusts (DSTs) and Opportunity Zones
What Are Capital Gains Taxes? Taxpayers pay taxes on their capital gains, which is the difference between what an investor pays to acquire an asset (often referred to as the basis) and the amount received when the investor sells the asset. An asset is anything of value that you can exchange for cash, including stocks, gold, and real estate, which are tangible assets, and intangible assets like patents and intellectual property. If the investor owns the asset for less than one year, this is considered short-term, and the gain is taxable at the same rate as ordinary income. If the investor has owned (held) the asset for one year or longer, the ownership is long-term, and the tax rate is lower.
Can You Get Opportunity Zones Amended?
Qualified Opportunity Zones (QOZs) were established in the Tax Cuts and Jobs Act of 2017. The actual zones were determined in 2018. Opportunity zones cannot be amended at this time. The tracts were developed to give potential tax incentives to new investors in low-income and distressed areas and promote long-term investments and economic growth.
When Can a Vacation Home Qualify for a 1031 Exchange?
A 1031 exchange is when capital gains taxes might be deferred when used to purchase a like-kind property used for business, trade, or an investment. However, there are a few situations when you might be able to relinquish or purchase a vacation home in a 1031 exchange.
Can Opportunity Zones Be Both Residential and Commercial Properties?
Opportunity zones were developed to bring economic prosperity to distressed areas by giving potential tax incentives for investments in residential and commercial properties. The Qualified Opportunity Zones (QOZs) define areas where investors can see potential federal tax incentives by deferring or reducing the liability of capital gains taxes realized on their investment. The program was established in 2017 in the Tax Cuts and Job Act.
Can Opportunity Zone Investments Be Used for Housing?
While you mainly hear about opportunity zone investments for businesses, some investors wonder if they can use investments in Qualified Opportunity Zones (QOZs) for housing. The answer, with stipulations, is yes, but the housing must meet specific requirements to qualify. Opportunity zones were established in 2017 under the Tax Cuts and Jobs Act to boost the real estate in certain areas of the United States. Investors can purchase real estate in these designated zones through Qualified Opportunity Funds (QOFs). Investments can be for many types of real estate including commercial, multi-family, or single-family housing, under certain conditions.
How Long Do I Have to Do a Reverse 1031 Exchange?
A reverse 1031 exchange differs from a standard 1031 exchange in that you can purchase a replacement property before relinquishing your original asset. There is a set amount of time for both identifying the original asset to be sold and to close the sale.
Is a Delaware Statutory Trust (DST) a Grantor Trust?
A properly structured DST (a legal entity formed under Delaware law, although not necessarily physically in Delaware) will be a grantor trust for the purpose of federal income taxes. That means that participants in such a trust will have undivided fractional interests in the property held by the DST. A grantor trust is one in which the trust creator is considered the owner for income tax and estate taxes.
Should I Pay Off My Rental Property?
Should you ever pay off the mortgage on your rental property early? That’s a complicated question. And, as with anything else in investing, the answer depends on a number of factors, like your reasons for investing in real estate and your long-term goals. If you’re in the game to grow your net worth, for example, your perspective will likely be very different from someone who’s in need of cash flow. If paying down the mortgage on a rental property is a decision you’ve been pondering, it likely means that you’ve come into enough liquidity to make it happen. But is eliminating a mortgage the wisest use of that windfall? Here’s a look at when it might be smart to pay off a rental property, and when it might not.
Can You Do a 1031 Exchange From a Commercial to Residential Property?
A 1031 exchange can provide some meaningful tax benefits, which is why they are so popular among real estate investors. One rule of a 1031 is that the investor must exchange for like-kind property. If you own an apartment building, does that mean you must exchange for another apartment building? Or, is it possible to go from commercial property to residential?
