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What is Like-Kind Property in Real Estate?
After researching 1031 exchanges, you might find yourself wondering what “like-kind property” really means when it comes to real estate. It’s a vague and sometimes misunderstood term when it comes to tax deferred exchanges. The Internal Revenue Code defines like-kind properties as those that have been held for productive use in a business or trade, or as an investment. Like-kind, as used in this code section, means a property that is “similar in nature or character, regardless of differences in grade or quality.” Still not clear?
Do I Qualify For A 1031 Exchange?
When you go to sell an investment property, you may be required to pay taxes on any capital gains from the transaction. Taxes are a drag on any investment; they reduce returns, and the amount of money you can apply to new investments. However, real estate investors have a tool at their disposal for deferring capital gains taxes — it’s called a 1031 Exchange.
What Is The Role Of A Title Company In A 1031 Exchange?
Every real estate transaction involves several interested parties: a buyer, seller, broker, mortgage lender, a Qualified Intermediary (in the case of a 1031 exchange), and a title company. Most people who have participated in a real estate deal are familiar with the roles of each of these parties, but they may not be as familiar with that of the title company.
What Is A Like-Kind Exchange?
Also known as a 1031 exchange, a like-kind exchange is an IRS-eligible transaction that allows the owner of investment property to defer capital gains resulting from the hold and sale of the property. A like-kind exchange does not completely dismiss the owner’s requirement to pay the capital gains taxes associated with the appreciation in property value upon disposal; it only defers it.
Disasters and 1031 Exchanges (Part 2)
If you’ve been following our blog, you’re probably familiar with the 1031 exchange process. Just to refresh, a 1031 exchange is when an investor sells a property and reinvests the proceeds into a second property to avoid paying taxes on the profits (also referred to as ‘deferring’ taxes). Specifically, the investor will avoid paying capital gains and depreciation recapture taxes.
Dealing With The Emotional Attachment To Your Property
This is part 1 of Ed Maddox's series, entitled: Things I Wish I Knew (While Completing My 1031 Exchange). In many cases and for various reasons, the idea of utilizing a 1031 exchange often comes into existence when considering the sale of a property that has been held for a long time. Often times, the success of the property is due to sacrifice, sweat equity, and constant diligence of management on the part of the owners.
Making Sense of Those Property Exchanges – Explanations
On paper, relying on the Internal Revenue Code (IRC) section 1031 to defer capital gain taxes on a real estate sale seems straightforward. You target the replacement property within 45 days, then close on that property within 180 days. Your Qualified Intermediary handles the exchange, resulting in a new property and a sweet tax deferral.
Benefits and Risks of Fractional 1031 Investments
*Update February 2019: Realized has established its Secondary Market and has completed its first Secondary Market transaction. Fractional 1031 investments are subject to the same benefits and risks as other real estate investments. However, the structure of fractional 1031 investments have their own unique characteristics.
Six Strategies For A Smooth 1031 Exchange
In a previous blog, we noted that 1031 Exchange rules can be challenging. That article focused on three Internal Revenue Service (IRS) rules when it came to identifying the replacement property or properties for a successful exchange.
‘Tis the Season - For Installment Sales
The upcoming holiday season can be a time of joy, with family, friends and celebration. The holiday season can also be a time of stress, with tangled lights to untangle and hang, gifts to shop for and wrap, and parties to plan.
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