How I Became An Expert on Taxes

What You Must Know About the 1031 Exchanges There are those investors who are quite wise to their tax benefits from the 1031 exchanges for several years. Those are just new to this surely wonder and they wish to know more about this. They would hear the realtors, the investors, attorneys and others say this but they are not quite clear on what the process actually involves. Well, to simply put it, the 1031 exchange would let an investor swap a business or investment asset for another one. Under a normal situation, the sale of such assets would have tax liability on 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. It is imperative that you keep in mind that the 1031 exchange isn’t a form of 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 really many things that you may not understand with the 1031 exchange and such is the reason why it is wise to ask for help from the professional who is experience with such 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.
The Key Elements of Great Exchanges
Keep in mind that such 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 10 Best Resources For Exchanges
You must also be aware of the exceptions to the personal use prohibition. Just like most things in the IRS code, there are also exceptions to the rule. 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. Keep in mind that the exchanged property has to be like-kind. This is an area which would sometimes confuse those new investors. The term like-kind doesn’t actually mean exactly similar but this means that such exchanged properties should be the same in use and scope. IRS rules can be liberal but there are various pitfalls for those who aren’t very careful. Remember that such exchanges don’t take place simultaneously. A very important advantage is that you may sell the present property and get about six months to close such acquisition of the 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.