1031 Tax Exchange And Property Laws
If you are a real estate investor it is in your interest to do your home work on 1031 exchange rules. It could save you many thousands of dollars in taxes, and could help you avoid many of the pitfalls and problems associated with 1031 exchanges. By doing a little research you can maximize and optimize your tax deferrals.
Deadlines are perhaps the most vital aspect to learning about 1031 exchange rules. You are obligated to purchase your replacement property only one hundred and eighty days following the transaction has been filed, or prior to the next filing cutoff. There is, however, a forty-five day identification time during which one can use one of three methods in order to identify which properties are under consideration for an exchange.
To maximize your tax deferrals, all of the cash from the sale of the property must be reinvested into the new property. The 1031 exchange rules state that you cannot use proceeds from the sale to pay for expenses that are not part of the exchange. To get the maximum tax benefit from these expenses you should handle them on a separate part of the settlement and footnote them and write a separate check to the buyer.
If you live in a different state to where the property is sold, many states mandate that the closing agent or real estate agent must withhold a percentage of the sale price to make sure that the state receives any tax revenue due, because tracking down these non residents later can be very difficult.
The sale of property by a foreigner is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). This act requires that the purchaser of a property withhold ten percent of the sales price under certain circumstances. Waiver rules may vary by state, so familiarize yourself with what is allowed in your location.
Trust only an experienced and qualified intermediary when it comes to handling the filing and the paperwork, as everything must be done in accordance with 1031 exchange rules. You can easily get 1031 exchange information online and locate the nearest competent intermediaries.
Go to http://www.investing-secrets.com/1031-exchange/recommends/article-1031 to get hold of a copy of this article for your own site.
If you're a real estate investor, you simply have to study your 1031 exchange rules. It could save you literally thousands of dollars in taxes, and could help you avoid many of the pitfalls associated with 1031 exchanges. By doing a little research you can maximize your tax deferrals. You must purchase your replacement property only 180 days after the transaction, and all of the money from the sale of your old property must be reinvested in the new property. Go online to find the most current 1031 tax exchange information and find a qualified intermediary to help you with the paperwork.
Published March 6th, 2008
Filed in Real Estate