Irs 1031 Exchange

Grasping The Concepts Of The IRS 1031 Exchange Plan

When a property owner sells their property, they have to pay capital gains tax on any profit made from the sale. If they originally paid three hundred grand on a vacant lot, and then later sell the vacant lot for four hundred grand, that one hundred grand of profit is taxed.

However, there is a special case where the property owner does not have to pay capital gains tax on the profit. This case is where the property owner is going to use the money made from the property sale to buy another investment property.

In this case, the capital gains tax is deferred until the sale of the replacement property because the property owner is not really selling property for profit as much as he or she is simply reinvesting the value of the property into another property. If that person were to pay capital gains tax on the sold property, they would be paying taxes twice on their investment. To save the capital gains tax a property owner must use an IRS 1031 Exchange.

An IRS 1031 Exchange is a process in which the property investor uses a middleman which can be an attorney, tax consultant, Qualified Intermediary, or accountant to show that the funds generated from selling an investment property will be used solely to buy a replacement investment property of equal or greater value.

To qualify for the IRS 1031 Exchange you must be selling an investment property, not your primary home. It is a good idea to find the replacement investment property first, and then try to find a buyer for the current property, which is to be sold, second. This ensures that the IRS 1031 Exchange process is move smoothly and that all of the requirements on your end will have already been taken care of.

You can transfer your investment many times using the IRS 1031 Exchange process, and this allows you to build wealth using your investment properties without having to pay capital gains taxes each time you make a property investment transfer. Without using the IRS 1031 Exchange process it is much harder to build your wealth using property investments. The IRS 1031 Exchange process can be very long and has a lot of important details, but this is where your middleman comes in.

A trained professional such as an IRS 1031 Exchange starker will take care of the forms and paperwork for you and help make sure you meet all deadlines. Using an IRS 1031 Exchange starker does cost money, but it costs a lot less money than capital gains taxes will cost you. Using the IRS 1031 Exchange process is just a smart investment tactic.

By deferring your capital gains taxes with the IRS 1031 Exchange, you have more money available to purchase a replacement property, which allows you to use more of your profit towards buying a better investment property which will generate even more profit.

If you are looking to build wealth with your property investments, using an exchange is preferable to simply selling the property. By exchanging your property investments you can build up your wealth and save on capital gains taxes. It is preferable to sell the property when you wish to invest in another area other than real estate.

1031 Tax |

IRS 1031 Exchange