What is a 1031 Exchange?
A 1031 tax-deferred exchange allows investors to reinvest the profits from the trade of investment property in one or more replacement properties without inviting immediate federal (and most state) capital gains taxes on the appreciated value. When the sale and purchase fulfill the 1031 exchange standards, taxes are delayed until the newly procured property is sold. This deferral strategy can be duplicated through any number of exchanges until the tax liability crosses into the individual’s estate upon death.
IRC Section 1031 enables an accurately structured exchange allowing any investor to trade property and reinvest the profits in a brand-new property and to put off all capital gain taxes. IRC Section 1031 (a)(1) states:
“No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like-kind which is to be held either for productive use in a trade or business or for investment.”
How it Works?
1031 Exchange enables investors to strategically manage their real estate investments while maintaining equity, diversifying portfolios, and gaining tax advantages. To assist investors with completing their 1031 exchanges on time, our partners providing 1031 Exchange maintain a database of investment properties suitable for 1031 exchanges. These investment properties range from multi family properties to TIC (tenants in common) properties to net-leased investments.
Access to a nationwide database provides potential advantages to real estate investors. For example, let’s say an investor wants to diversify geographically and get into a growing real estate market in the Phoenix, Arizona area. The problem for many investors with this strategy would only be finding the right property to invest in there within the 1031 deadlines.
There are several rules and regulations to comply when executing a 1031 exchange, and you may find some complexity when trying to follow. For example, you must name one or more potential replacement properties within 45 days following the sale of your relinquished property. Then, you must acquire replacement property within 180 days of the sale of the first property. Also, the replacement property needs to have a purchase price and mortgage balance equivalent to or higher than the relinquished property being sold. There are many added regulations to obey, and if done clumsily, you could have to pay taxes and even penalties.
Allow Experts to Manage a Successful 1031 Exchange in Arizona for You
1031 Exchange enables your money to churn the maximum profit for you. However, the 1031 exchange process in Arizona is extremely complex in nature and it would be wise to seek guidance from expert professionals. We have extensive experience in handling highly profitable exchanges for our varied client base.
For consultation and assistance regarding 1031 Exchange Arizona call –888-993-2835 or email us at firstname.lastname@example.org.