1031 EXCHANGE IN A NUTSHELLA 1031 Exchange can also by referred to as a Exception to Capital GainsTax, Tax Free Exchange, Like-Kind exchange, or Starker Exchange.She specializes in the following real estate locations: Black Forest,Briargate Colorado Springs, El Paso County, Gleneagle, Kings Deer,Monument, Northgate, Palmer Lake, Trilakes, Tri-Lakes, and Woodmoor properties. Undernormal circumstances, when you sell a property you have to pay tax onthe gain. Gain is caused by taking depreciation deductions for taxpurposes or by the property appreciating in value during its ownership. ASection 1031 tax deferred exchange, named for the Internal Revenue CodeSection it refers to (also known as a Starker Exchange, Tax FreeExchange, or Like-Kind exchange), allows an exception to the capitalgains tax. When you sell your business or investment real estate,replace it with a different business or investment property, andcomplete an exchange, you can defer payment of the capital gains tax normally required on these sales. Ifyour plans include using the money from the sale of a business orinvestment property to buy more of the same, a 1031 Exchange providesgreater proceeds for your next investment-more than you could gain through the re-investment of after-tax proceeds. A1031 Exchange is not a tax loophole. It is a section of the InternalRevenue Code, written by Congress, to allow anyone who meets all the requirements to sell their property and defer paying taxes on the gain .
UNDERSTANDING AN EXCHANGEAllrelinquish (old) and replacement (new) property must be vacant land,rental property or property used for trade, business or investment. Ifthe properties meet these requirements, you may exchange any real estate for any other type of real estate. Youcannot have actual or constructive control of any of the proceedsreceived from the sale of the old property. By law, all money is heldby a Qualified Intermediary (also referred to as an Accommodators orFacilitator). You cannot have an associate or employee, your attorney,broker or CPA hold the proceeds, nor can you leave the proceeds in escrow until the second property is purchased. You have45 days from the date of closing on the old property to identify a list of properties, from which you will purchase the new property. From the date of closing, you have 180 days to close on one or more of the properties from your 45-day list. The titleholder on the old property must be the same titleholder on the new property. You mustreinvest all cash proceeds from the sale, and purchase a new propertyor properties of equal or greater value, in order to avoid taxation on the gains.
HOW DO YOU START AN EXCHANGE
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