1031 exchange – common questions and answers

When you sell one of your real estate properties, the capital gained on the profit will become the subject of a tax. If you do not want to pay the taxes, then you can choose to apply for a 1031 exchange. The exception is for the investors who choose to relocate their property, so if you know that you want to move the office of your business to another place, then you have all the chances to meet the requirements of the exchange 1031. But you have to keep in mind that you cannot use this exchange when it comes to moving from a personal property, because the program is designed exclusively for investment properties. There are several limitations and requirements you should meet, so you should make sure that you get in touch with a specialist in this domain, or you check online for complete guides, because you have to be sure that you will successfully swap your property.

How much will I pay for doing the exchange?

Depending on the company, you decide to collaborate with, the fee for exchanging the property may vary. You have to be sure that you ask them from the beginning how much you will have to pay for two properties exchange, and if there is any interest you have to pay the exchanger. If you want to exchange additional properties, then you may have to pay a fee for them, so ask the professional company you work with at the beginning. In the majority of cases a third party is the one that gets the fees.

What should I know about the 180-day exchange?

If you read the section 1031, then you will find out that you have to buy the replacement property within 180 days since the moment when you close on your property. Also, this period may begin when the due-date of your return comes, so you have to ask the professionals when it actually begins in your case. The date when you purchase the replacement property is seen as the closing date of the exchange process. In case you meet issues and the due date of your tax return falls to be before the 180 days, then you will have to fill a tax-return extension.

What are the requirements for the tax deferring?

To make sure that you will have no issues with the exchange, you have to be sure that you meet all the following requirements:

  • Both your property and the one you want to swap it for have to be like-kind. If you want to find more about this, you can read all the information you need online.
  • You have to meet the mandated timelines in order for the exchange to take place.
  • You have to make sure that all the funds, you get from selling your property, are used to purchase the new property. The market value of the replacement property has to be equal or higher than of the relinquished one. For further information talk with an expert in this domain.

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