| |
| |
|
|
Real Estate |
|
Preserve Equity, Build for the Future Using a 1031 Tax Exchange
Thinking of trading up on an investment resort property? If so, look into 1031 Tax Exchanges (based on IRS Code Section 1031), which allow taxpayers to defer taxes on capital gains resulting from the sale of investment real estate, often a sizable sum since combined Federal and State taxes can run as high as 38 percent. With an exchange, owners are able to preserve equity, while still selling the property. The underlying concept is that an exchange of like-kind property for like-kind property does not generate funds, which can be taxed since the profits go directly into the new or replacement property. To accomplish this, sellers hire a Qualified 1031 Intermediary (QI) to document the sale as an exchange and to receive the funds from the sale. The QI then delivers the funds directly to the closing agent for the replacement property who deeds the property to the taxpayer. Central to a 1031 Exchange is the interpretation of like-kind property. While the common assumption is that like-kind implies land for land or a condominium for a condominium swap, the interpretation of like kind is actually less literal. Rather, it defines like kind as meaning that both the replacement and the original property must be used as an investment. So land, condominiums, single-family homes and motels can all be exchanged for one another as long as they are used in the exchanger's business or held as an investment. The amount of debt held on the replacement property must be the same as the amount of debt on the original. 1031 Exchanges are complex mechanisms and like all IRS requirements very specific. For example, exchangers have 45 days from closing to identify properties they intend to purchase and 180 days to complete the purchase. Purchase and Sale agreements must include verbiage indicating the intent to affect a 1031 Exchange. The 45-day time frame used to be onerous for sellers. Now, they can opt for a Reverse Exchange, in which an additional third party called "the exchange accommodation title holder" (EAT) acquires title to the replacement property until the original property sells. Reverse Exchanges shift the 45- and 180-day time frame to the selling side of the transaction. With an Improvement Exchange, which also uses an EAT to hold the replacement property, sellers can build investment properties from the ground up or improve existing properties. The improvements have to be built and paid for during the 180-day period. If you are interested in a 1031 Exchange, the first step is to consult your tax advisors as well as an attorney or CPA who is knowledgeable with 1031 Exchanges. Make sure that your real estate professional knows you plan to conduct an exchange and be sure that he or she is familiar not only with the process but also with the specific documentation and time frame mandated by the IRS. This article is intended to inform readers, but does not constitute any financial or legal advice. Neda Dabestani-Ryba is a Realtor in Maryland. She is a member of the President's Circle of Top Real Estate Professionals. She can be reached at (800) 536-3806 or visit her website for more information: http://neda.dabestani.pcragent.com/ Prudential Carruthers REALTORS is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.
MORE RESOURCES:
Real-Estate - Google News |
|
|
|
RELATED ARTICLES
Ten Creative Financing Techniques Do all the creative financing techniques you hear about really work? Yes, actually. They probably have all worked somewhere for someone at least once. Green Building Media Fact Sheet - Past, Present & Future PastSpecialized, niche home builders began constructing resource-efficient, environmentally sensitive homes in the early 1970s. The home building industry coined the phrase "green building" in the late 1980s/early 1990s, turning a movement into a quiet revolution. According To Sellers, Silence Isnt Always Golden' When trying to sell a home, silence isn't always golden especially when you're expecting your real estate agent to call. In fact, it's one of the leading complaints among sellers in the real estate market. Santa Visits a Just-Moved Newcomer in South Florida Twas the night before Christmas and all through the house Not a creature was stirring, just the Mac and the mouse, When all of a sudden a wail filled the air As the burglar alarm detected a hair.I ran to the keypad, pushed down on the code Hoping neighborly tempers would not explode. Negative Gearing - It's Not to Your Benefit! The concept of negative gearing has been originally developed to encourage real estate investment in Australia by allowing any income losses from property investment to be deductible from other income as a tax benefit. This means that the taxable income of the owner will be reduced after the deduction and therefore the total tax payable is also reduced. Buying Beach Houses in New Zealand: Real Estate and Investment Opportunities Buying a beach house in New Zealand offers many possibilities.New Zealand is made up of two main islands, North Island and South Island, giving it miles of coastal lands and perfect beaches to live by. Buy to Let Property Investment In recent years buy to let has been a popular way of investing in residential property. Stock markets are out of favour with many investors who have seen the values of their portfolios, endowment policies and pension funds shrink, whereas property has generally continued to rise in value. Renting a House Renting a house or a room in your home is a great business that millions of people take advantage of to make some extra cash. While many people rent houses each year, not all of them are successful. Searching for CLUEs: What Homebuyers & Sellers Need to Know About Homeowners Insurance Homebuyers and sellers should be aware about issues involving homeowners insurance and the C.L. How To Find An Experienced Monticello Illinois Realtor Finding a professional Monticello Realtor in Illinois is the best way to find the perfect property or home. A licensed realtor can assist you in locating the type of property you want in the price range you desire. How To Realistically Get Started As A Real Estate Investor When it comes to real estate investing, most beginners find themselves with plenty of desire, a little bit of knowledge (from books, seminars, online message boards or something like that) and in most cases they have little or no money to get started with. Does this sound like you? If so you are not alone. Property Investment - What Future For the Biggest Bubble of All Time? The Economist magazine published a special report in this months issue entitled "House Prices ? After The Fall". Some might call it pessimistic, alarmist, nonsense or worse but only the foolish would choose to ignore the research that comes out of a think-tank with the kind of resources that this highly respected publication has. How to Create Cash Flow Out of Thin Air! Want to see a trick every real estate investor will love?From the Desk of Thomas KishCrazy as it may sound.. Home Equity - Don't Spend It on Risky Investments The housing market has exploded in the last five years, and homeowners are finding that the equity in their homes is greater than it has ever been. The equity in a home is the difference between the market value of the home and the amount still owed on it. The Benefits of Fractional Ownership in Private Residence Clubs A New Way to Own a Vacation Home - For the Select Few: Fractional ownership of vacation homes, also called private residence clubs, is a relatively new concept that allows you to enjoy four to 12 weeks of home ownership privileges per year at an upscale, luxury resort but at a fraction of the cost of whole ownership.If you want to own an impressive second home complete with personalized services and located in an expensive resort area but can't quite justify the expense because you'll only be using it a few weeks or months of the year, this type of real estate arrangement may appeal to you. Searching For Maui Beachfront Houses? Who wouldn't want to move into a Maui beachfront house? From the custom architectural jobs done on many Maui homes, to the beautiful beaches and other natural attractions in Maui, you're bound to find something you will love about Maui beachfront houses. However, like any home buying process, you'll need to make sure several things are in order before you make your move into your new Maui beachfront house. Not Everyone is Buying or Selling, Some are Doing Both As if one real estate transaction is not hectic enough? many of us end up needing to sell one place in order to move up to the next? this is the "real estate catch 22". Do we buy first?? Do we sell first?? If we are fortunate, these events occur at the same time, but that is not always the case. Understanding the Escrow (Closing) Process 1. What is an escrow?Escrow is defined as a process where parties deposit instructions and funds with a "disinterested" third party until conditions of the instructions are met. First Impressions Will Sell Property Fast! First impressions count, buyers will have already formed an impression before they step into your property. A well-kept garden, pathway and fence, plus a freshly painted front door are immediately appealing, whereas a scruffy outdoor space with a litter bin outside the front door may turn many prospective buyers away. Old House? New House? Weighing Your Options Maybe it has something to do with a childhood home we fondly remember. Many of us long for old homes built with solid construction, quality craftsmanship and beautiful details.
|
||||||||||||||