|
|
Consider the case of two investors each with $200,000 appreciated equity in their properties.
Investor A sells without an exchange, pays $60,000 in capital gains taxes and uses the $140,000 remaining as a 25% down payment on a $560,000 office building.
Investor B exchanges free of taxes and uses the full $200,000 equity as a 25% down payment to acquire an $800,000 office building.
That means Investor B has acquired $240,000 more income-producing property. So not only has the astute investor saved $60,000 in taxes... the tax savings are available to leverage into even greater income growth!
A Qualified Intermediary should be contacted when considering a 1031 Tax Deferred Exchange. I have worked with Jersey Realty Exchange Corporation in the past.
They can be contacted at 609-391-1031 or 888-871-1031.
How it Works (Information supplied by NAR):
The Basic Rules For A 1031 Exchange
The Relinquished Property Must Be Qualifying Property. Qualifying property is property (or equipment) held for investment purposes or used in a taxpayer's trade or business. Investment property includes real estate, improved or unimproved, held for investment or income producing purposes. Property used in a taxpayer's trade or business includes his office facilities or place of doing business, as well as equipment used in his trade or business. Real estate must be replaced with like-kind real estate. Equipment must be replaced with like-kind equipment.
| |
| Property Which Does Not Qualify For A 1031 Exchange includes: |
- A personal residence
- Land under development
- Construction or fix/flips for resale
- Property purchased for resale
- Inventory property
|
- Corporation common stock
- Bonds
- Notes
- Partnership interests
|
|
|
