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Does Depreciation Restart after a 1031 Exchange?
When investors do a 1031 exchange, their basis carries over into the replacement property. They are also able to continue taking the annual depreciation expense. But does the depreciation restart or change from the existing schedule once the replacement property is acquired?
How to Report a Reverse 1031 Exchange on a Tax Return
Reporting a reverse 1031 exchange on your tax return doesn’t require too much work above a regular 1031 exchange. However, if you have done more than one reverse 1031 exchange, you’ll need to file forms for each one, which can certainly add to your workload at tax time.
What Can You Buy With a 1031 Exchange?
A 1031 exchange is an investment and tax tactic that gets its name from Section 1031 of the Internal Revenue Code. The execution of a 1031 exchange may allow a taxpayer to defer recognition of capital gains taxes when they sell an investment property and reinvest the proceeds into another asset. The rules are strict in some ways, such as the timeline, but generous in others, such as regarding what properties the taxpayer can exchange.
How Does a 1031 Exchange Work with Seller Financing?
Seller financing is a common practice in real estate transactions. In this unique form of lending, the seller of an investment property also functions as the buyer’s mortgage lender.
What is a 1031 Cooperation Clause and How Does it Work?
A 1031 exchange is much different than a straight sale or other type of real estate transaction. As such, it’s important for exchangors to inform all parties involved that the pending transaction will be part of a 1031 exchange because there are some extra steps both parties must take to ensure the exchange complies with Internal Revenue Service regulations.
Who Takes Title In a 1031 Exchange?
In a typical 1031 exchange, an investor decides to sell a property and reinvest the proceeds. If the property has appreciated during the time the investor has owned it, they will be responsible for paying capital gains taxes on the increase in the fair market value. Assuming that the investor has held the asset for more than one year, the taxes will be assessed at the long-term capital gains rate, which is typically lower than the tax rate for ordinary income but can still be as much as 20 percent.
What Happens If You Sell a 1031 Exchange Property At a Loss?
If you’ve been reading our blogs on a regular basis, you know that we publish a great deal of information about 1031 exchanges and potential tax benefits. Specifically, a well-executed like-kind exchange can defer capital gain taxes and depreciation recapture to a future date.
Can You Change Ownership in a 1031 Exchange?
Real estate investors who wish to defer capital gains taxes from the sale of investment properties by completing a 1031 exchange have a lot of rules and regulations to follow throughout the exchange process.
What is a Simultaneous 1031 Exchange?
Timing is a crucial element throughout the 1031 exchange process.
How Often Does the IRS Audit 1031 Exchanges?
The 26 U.S. Code § 1031 – aka the 1031 exchange or like-kind exchange – can be a good strategy to help defer capital gains taxes on the sale of real property. But as mentioned in a previous blog, very stringent rules exist when it comes to conducting this type of exchange. Playing fast and loose with in-stone deadlines, property values, or other factors could wave a red flag at the IRS.
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