1031 Properties

As per IRC Section 1031, a properly structured 1031 Exchange will allow an investor to sell a property, to reinvest the proceeds in a new property and to defer all capital gain taxes. Under the replacement property acquired, it is necessary that the like-kind shouldn’t have a variation in its grade or quality and may include: Office Buildings, Storage Facilities, Industrial Facilities, Retail Shopping Centers, Single Family Rentals, Multi-Family Rentals, and Raw Land.

A like-kind property concerns to two assets that are the same type which in turn makes an exchange between them being tax deferrable. The two assets need to be of the same kind but are not mandatory required to be of the same quality to qualify as like-kind property.

Properties that are held for investment usually does not require to produce cash flow or income through the same. All that is to be achieved by them is to be held for investment to qualify for 1031 exchange treatment. There are other means through which a person could acquire and use a property or asset in their trade or business and qualify for tax-deferred exchange treatment.

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As far as Qualified Property is concerned, below mentioned is an in-depth look at it –

Your relinquished and replacement properties will be suitable for 1031 exchange treatment if they are deemed to be qualified use property.

Above all other points, the most important one is that your properties or assets must be used in your trade or business or held for investment. Which is due to reason being if the Properties that are not held for investment or used in your trade or business, for example: if they are being held for sale then it will not qualify to be treated for 1031 Exchange . Once you take a closer look into the process of what qualifies and what does not qualify, you will find a lot of different opinions on this issue because the codes and regulations are not adequately defined held for investment or use in a business.

Intent to Hold

A lot of investors with their advisors will be delayed for a longer time duration than the usual duration it should take to hold title to your property while trying to decide whether if it would be considered qualified use property hence qualify for 1031 exchange treatment. The real issue here is not concerned with the time duration.

The investors intend to hold the properties for investment purposes is what really matters. It must be your ability to prove that you had the intent to keep your relinquished properties and likewise your like-kind replacement properties for investment or use in your trade or business should you be selected for analyzing.

The best ways to showcase your intent to hold is to make sure that your properties be maintained long enough so that you can easily prove you had the intention to hold for investment.

Properties Held for Investment

Properties possessed for investment purposes can be any property or asset that you acquire and maintain for income generation or for capital appreciation. Properties held for investment do not have to generate income or cash flow. They simply must be held for investment to be eligible for 1031 exchange treatment.

Properties Used in Your Trade or Business

Another favorite way in which you can also acquire and use a property or asset in your trade or business, and it will pass for tax-deferred exchange treatment. You might purchase a commercial office building to operate your business from or acquire manufacturing equipment to produce or manufacture your product.

Properties Held for Sale

Such Properties or assets acquired and held for sale will not qualify as used in a trade or business or possessed for investment and will typically not be suitable for 1031 exchange treatment. The acquisition of property for the sole purpose of fixing it up and then selling it, or what is also referred to as flipping property, is a classic example of a property being held for sale and not held for investment. Obtaining a multi-family property and converting into condos or something similar and then selling individually is an excellent example of property held for sale and not for investment.

Personal Property

In addition to all mentioned previously, personal property also qualifies for 1031 exchange treatment if the qualified use property requirements are met. State law generally dictates the determination of whether a property is classified as real or personal property.

Domestic Property versus Foreign Property

Property sold in one state can be exchanged for property located in another state, if they are located within the US. Domestic property cannot be exchanged for non-domestic property. Since specific state and/or local exceptions may apply, it is best to consult with the local legal and tax advisor. Get current 1031 exchange property list.

Engage our services for a profitable 1031 Exchange and defer Taxes

1031 Exchange enables your money to churn the maximum profit for you. However, the exchange process 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 and to get 1031 exchange property list call – 888-993-0590 or email us at info@1031Xchange.com.

“Our tax-deferred 1031 exchange programs can save millions in taxes, increase investor equity, and compound annual cash flow distributions and returns”

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1031Xchange.com is a website platform owned by Investment Net LLC. (“Platform”). Investment Net LLC is not a registered broker-dealer. Private investment marketing and other services advertised on this Platform are offered by connecting investors with relevant Sale Representatives/Broker-Dealers/Real Estate Agents.

IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes; therefore, all the investors/clients/consumers are advised to consult their tax and legal professional for details regarding their situation on any kind of investment. There are material risks every investor should know, associated with investing in 1031 Exchange properties, Delaware Statutory Trust (DST) and any other kind of Real Estate Properties. The risks include tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment. This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the Confidential Private Placement Memorandum. Please be aware that this material does not replace the PPM.