1031 Exchanges How to Defer Your Taxes on Your Real Estate Investments

< span                            property has less debt, then the   class="cap">The         seller needs to produce extra      term 1031 exchange comes        cash from an outside sources and   from the section number of the        cover the difference in debt. The  U.S. Internal Revenue Code and        debt reduction is constructive     identifies special rules for          receipt as though it is cash and   like-kind exchanges in real           there is tax on the                estate. The code states you can       difference.                     defer the tax when you exchange a      The identification period       property used exclusively for         occurs within 45 days after the    business or as an investment          close of the original property     property, for another property        and requires the identification    that is of the same type.             of a replacement property. The     Remember, the tax postpones and       replacement property needs to      at the sale of the replacement        close within the acquisition       property, adds to any taxable         period, which is 180 days after    gain on that property. The            escrow closed on the               government recognizes that when       relinquishing property.         new property replaces a property       If the seller does not put all  sold and the seller reinvests the     the money into the next property,  money, they never really take an      that money receives taxation as    economic gain.                        boot and if the sale followed all  There are many rules to follow to     other rules, the property still    maintain the tax-deferred status      qualifies for partial tax          in a 1031 exchange. The seller        deferral.                       has to invest all monies into the      A reverse exchange also         next property or taxation occurs      exists. This occurs when a         on the money received. The seller     taxpayer finds the perfect         has to have equal or greater debt     property before he sells the       on the new property. If the new       original property.              Properties do not have to cost     and institutional property         the same amount or be in the same     otherwise outside the financial    neighborhood to qualify as a          abilities of the individual.       like-kind exchange. Like-kind         Property managers normally handle  properties have the same nature       the daily problems. If one tenant  or usage. Rental properties need      in common wants to sell, the       replacement with rental               other tenants in common have the   properties.                        option to vote to sell, not sell   There are many pitfalls for        or buy the individuals shares.     the average person to stumble         The same rules apply for tenants   into on a 1031 exchange, which is     in common as apply to the          why a qualified intermediary is       individual.                     important for a 1031 transaction.      A 1031 exchange is a            The intermediary holds the funds      particularly beneficial way for    in trust until the replacement        property owners to defer taxation  property closing.                  and make the entire profit, not    Tenants in common, also known      just the after tax profit, keep    as co-tenancy, is an increasingly     working for their                  popular method to purchase            benefit properties. This form of              >About the                      ownership assigns fractional          Authorownership by the amount of money      id="authorbio"                     invested. The ownership of the        class="membersnoticewhite">Has a   property goes to heirs at the         passion for real estate            point of death, unlike joint          investing, real estate and 1031    owners with the rights of             exchanges. If you would like more  survivorship. The collective          information on 1031 Exchange       power of the group’s dollar makes     Investing visit the the 1031 exchange easier and          href="http://www.1031alternatives  allows ownership in commercial        .net">1031 Exchange                Experts.                             Published At: www.isnare.com Permanent Link: http://www.isnare.com/?aid=267465&ca=Real+Estate Got a question about this article? Ask the community! Article Tags: 1031, exchange, property ...Archive >>