A Beginners Guide To Finances



A Few Things that You Should Know Regarding the 1031 Exchange Some investors have been wise to such tax benefits of 1031 exchanges for a number of years. Those are just new to this surely wonder and they wish to know more about this. They would hear realtors, investors, attorneys and others mention such but they are certainly not very clear on what the process actually includes. To make it easy, the 1031 exchange would allow the investor to swap a business or such investment asset for a different one. Under normal circumstance, the sale of the assets would incur tax liability on the capital gains. But, when you meet the requirements of section 1031 of such IRS tax code, then you will be able to defer any capital gains tax. But, it is really important to note that the 1031 exchange is not a tax avoidance scheme. When you would sell the investment asset or the business and you won’t replace this with another property, then you will pay for the capital gains taxes. There are so many nuances to the 1031 exchange and this is the reason why it is really wise to seek some help from such professional experienced with the transactions. Still you are also curious regarding the basics, here are the things that you must be aware of before you try the 1031 yourself.
Learning The Secrets About Taxes
You must know that this is not for personal use. Though you would get tempted to think of trading your residence and avoid dealing with the capital gains, such 1031 is jus available for the property that is held for the business or the investment use.
The Key Elements of Great Exchanges
You must also be aware of the exceptions to the personal use prohibition. Just the same with a lot of things in the IRS code, the are exceptions to the rule as well. The personal residences don’t qualify, you can also successfully exchange the personal property like the interest in a piece of artwork or tenancy-in-common. You have to remember too that the exchanged property must be like-kind. This is actually an area that would sometimes confuse the new investors. Such term like-kind doesn’t mean exactly the same but this would mean that the exchanged property must be similar in scope and use. The IRS rules may be liberal but there are several pitfalls for those who are not quite careful. You must also remember that the exchanges don’t actually happen concurrently. One really important benefit is that you can sell the current property and have around six months to close the acquisition of such like-kind replacement property. Such is termed as delayed exchange. If you like to complete this exchange, then you need the help of such qualified intermediary.