1031 Exchanges: Qualifications And Property
A key topic that should be very important to real estate investing professionals is that of 1031 tax exchanges. If you are really serious about investing in real estate it will benefit you to study and learn the 1031 exchange rules in depth. This way you will be investing with the know how to get the best tax deferrals.
Dead line are by far the most important thing to know about 1031 exchange rules. It is crucial to purchase a new property within the given 180 days after you have sold your property. Further more, there is a 45 day period in which you must identify one of the properties you are attempting to exchange!
Your goal is to limit the total amount of deferred taxes. This can be accomplished by moving the entire amount into a new property investment. According to the tax code, "1031 exchange rules", it is not possible to take money generated from a sale, and use it for alternate, unrelated expenses. Therefore, you need to be particularly specific with your documentation. Keep a specific set of books dealing with the exchange, and write separate well documented checks for each part of the transaction.
It is hard for a state to get all the contact information of someone who does not live there. Therefore, if you live in one state but buy property in another state, most locales will require your closing agent, broker, or real estate agent to withhold a percentage of the sale price to be applied to your tax bill.
The sale of property by a foreigner is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). This act requires that the purchaser of a property withhold ten percent of the sales price under certain circumstances. Waiver rules may vary by state, so familiarize yourself with what is allowed in your location.
You must use a qualified intermediary who completes all the necessary paperwork and filing and must adhere to the 1031 exchange rules. There are many places on the internet where you can find 1031 exchange information and you can even find qualified intermediaries in your state.
Go to http://www.investing-secrets.com/1031-exchange/recommends/article-1031 to get hold of a copy of this article for your own site.
If you are a real estate investor it is in your interest to do your homework on 1031 exchange rules. It could save you many thousands of dollars in taxes, and could help you avoid many of the pitfalls and problems associated with 1031 exchanges. By doing a little research you can maximize and optimize your tax deferrals. You are obligated to purchase your replacement property only one hundred and eighty days following the transaction has been filed, or prior to the next filing cutoff. You can easily get 1031 tax exchange information online and locate the nearest competent intermediaries.
Published March 6th, 2008
Filed in Law, Real Estate