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What Type of Properties Benefit from a 1031 Exchange?
As mentioned in previous blogs, the only things certain in life are death and taxes. And what’s certain is that if you sell a real estate property, you’ll have to pay, at the very least, capital gain and depreciation recapture taxes.
How Long Do You Have to Hold Property in a 1031 Exchange?
Suppose you have previously executed a 1031 exchange, selling one property and reinvesting the proceeds into a replacement while deferring the capital gains taxes. In that case, you already know the process requires strict adherence to tight time frames. First, you must identify potential replacement assets within 45 days of the sale and then complete the purchase transaction within 180 days (including the 45 designated for identification.) Meeting this requirement can be challenging, but the reward is the ability to reinvest the entire proceeds from the sale while delaying the need to pay the capital gains taxes.
1031 Exchange Summary: Breaking Down the Key Components
The 1031 exchange, often referred to as a like-kind exchange, is a powerful tool in the world of real estate investing. It enables property owners to defer capital gains taxes when they sell one investment property and then reinvest the proceeds into another, similar property.
How to Set Up a 1031 Exchange
Setting up a 1031 exchange involves a series of well-defined steps to comply with the regulations set by the Internal Revenue Service (IRS). This post will dig into the details of several critical exchange components.
1031 Exchange Estate Planning: What Happens If the Owner Passes Away
Real estate investors have long used 1031 exchanges to reposition and diversify their real property holdings, potentially defer capital gains taxes, or pursue likely assets that might offer greater value and equity.
Can You Do a 1031 Exchange With a Mortgage?
It’s common that a mortgage is part of a 1031 exchange. So yes, you can complete a 1031 exchange with a mortgage. But a few things happen when you do a 1031 exchange with a mortgage, and it's important to know what those are.
Is Section 1033 Mandatory?
The downside of real estate ownership is the specter of property loss. A powerful storm could destroy your private residence, vacation home, or investment real estate. Or you could learn that your parcel of land might be subject to eminent domain seizure.
What Financial Advisors Should Know About 1031 Exchanges
As a financial advisor, you want to offer your clients helpful guidance and sound advice—that’s why they engage your services, after all. In many cases, you may suggest investment options and strategies that the client isn’t familiar with, so they rely on you to know the details and to provide suitable suggestions. Depending on your client, you may offer assistance with various tasks ranging from retirement forecasting to budgeting to estate planning. Often, you will recommend investment choices and offer tax management strategies.
Can Furniture Be Used in a 1031 Exchange?
In real estate transactions both large and small, it’s common to have incidental property – furniture, fixtures, and equipment – included with the buildings that are bought and sold.
Can You Do a 1031 Exchange on an Aircraft?
A 1031 exchange is a remarkably helpful tool for investors to manage their capital gains taxes. When you want to sell an investment property and reinvest the proceeds, using a 1031 exchange enables you to reinvest the entire proceeds while deferring payment of capital gains taxes. This simple tactic provides excellent leverage for investors.
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