Do not draw any plans for a primary residence or a manor immediately prior to or after a 1031 Exchange.
The house shouldn’t be moved right after a 1031 exchange, even temporarily.
A contract must not be created to obtain the replacement property unpredicted upon the sale of a primary residence.
Unfailingly advertise and list to rent a property at a saleable rental price.
Make notations about the method used to establish the asking amount of the rent.
Never begin creation for personal use right away after acquiring the property.
Always assure that the replacement property is rent appropriately.
Make notations about the details of all the potential tenants who visited the property with an
Intention to rent. They might be needed to be called upon as witnesses.
If unforeseen circumstances led you to move into the house, it must be made sure that is documented and keep relevant proofs handy. Examples – Losing job (Relieving letter), Illness (hospital records), Marriage (Certificate of marriage), Elderly parent, so on and so forth.
Now as for selecting a qualified intermediary, one must keep in mind that it is someone who is linked to the taxpayer, either personally or financially cannot serve as the QI. This indicates that the taxpayer is only entitled to engage the services of their current accountant, attorney, broker, investment banker, broker or real estate agent. A 1031 exchange specialist should be insured and bonded against omissions and errors. An extensive educational background in finance, law or tax is imperative.
1031 Exchange is highly beneficial as the U.S. Internal Revenue Code, allowed parties to defer the payment of capital gains after the sales of a property that was invested in and also reinvest the earnings of the transaction within mentioned duration limits in a property or properties of like kind which could be valued equal than it or even more. Taxes can be deferred by the investors on the trading of the property until it is time IRS rules are accurately followed. Making this not just a brilliant approach for saving taxes and promoting speculation, in fact a brilliant estate planning tool. It is to be noted that an investor can defer capital gains on investment property endlessly until he is no more, possibly avoiding them altogether!