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The Execution Risk Associated With 1031 Exchanges
Savvy investors know that a 1031 exchange can help boost potential cash flow and manage investor’s tax liability by deferring capital gains and other taxes on the sale of investment real estate and acquisition of replacement assets.
I'm Doing A 1031 Exchange, And I Need Some Help
A 1031 exchange can be a great way to delay taxes on gains from your property's sale. Rather than handing a chunk of your gains over to the IRS, you can purchase another property from your sale's proceeds and delay your tax bill for years down the road. However, even with these advantages, a 1031 exchange may not be the right route for everyone. In this article, we'll look at a few areas to consider when deciding to do a 1031 exchange or not.
1031 Exchange Taxable Vs. Non-Taxable Selling Expenses
When selling or purchasing an investment property in a 1031 exchange, certain expenses paid from 1031 proceeds will result in a taxable event for the investor. Routine selling expenses do not create taxable boot. Operating expenses and financing fees paid out of sales proceeds will result in taxable boot. A close examination of the closing statements for both properties (relinquished and acquired) can reveal what might be considered boot. In this article, we’ll navigate the taxability of selling expenses in a 1031 exchange.
I Need A Backup Strategy For My 1031 Exchange
You have a property picked for a 1031 exchange, but want to create a backup plan in case it falls through. In this article, we’ll walk through a few simple options that can be added to your 1031 forms and used as a backup.
Can Foreign Investors Do 1031 Exchanges?
Can foreign investors take advantage of IRS §1031 to execute a tax-deferred exchange when selling their U.S. real estate assets? The short answer is yes. The longer answer is a bit more complex. Congress enacted the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) to impose a tax on foreign investors selling real property assets in the United States. The act requires that anyone who buys real estate assets from foreign persons or entities must withhold a prescribed part of the purchase price, which would normally go to the foreign seller. Why exactly? To ensure that the foreign seller pays capital gains taxes when they are due.
The Extension Of 1031 Exchange Deadlines: Are You Ready?
When the IRS announced various deadline extensions in April 2020, a large bulk of the U.S. population breathed a collective sigh of relief. The extension of quarterly tax payments and filing deadlines from April 15 to mid-July provided wiggle room for taxpayers dealing with COVID-19’s economic fallout.
How You Complete a 1031 Exchange in 10 Easy Steps
A 1031 “like-kind” exchange is widely used by real estate investors to create and preserve wealth. In simple terms, Internal Revenue Code §1031 allows real estate investors to defer capital gains taxes on the profits from selling an investment property, provided the sale proceeds are “exchanged” (reinvested) into another “like-kind” property (investment real estate).
The End of Non-Real Estate 1031 Exchanges?
Our previous blogs on 1031 Exchanges focus mostly on real property, or real estate. However, the Internal Revenue Code (IRC) 1031 also covers what is dubbed “personal property.” In other words, property held for investment and/or business purposes, but that isn’t real estate, is also eligible for 1031 exchanges - at least for the current time.
What Happens When It's Time For Me To Sell My Investment Property?
There are two general paths that you can take when it comes time to sell your investment property. One is to defer capital gains taxes and invest all of your gains into another property. The other is to cash out and do whatever you like with the money from your investment property sale. But for that flexibility, you’ll have to pay taxes on capital gains. In this article, we’ll look at both options so you can decide which may be right for you.
The IRS Extended The 1031 Deadline, But Should You Wait?
Late in the week of April 6th, the Internal Revenue Service (IRS) extended the deadline for 1031 like-kind exchanges for those falling between April 1 and July 15, 2020. This was in response to the COVID-19 virus and the difficulty that the “shelter in place” order caused for 1031 investors who were in the process of buying and securing financing for a replacement property. While this extension is great news, and takes unnecessary pressure off of those in a 1031 exchange, it might not be the best solution for everyone. Let’s consider the options below.
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