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Some 1031 Tax Deferred Exchange
Definitions
Properties: The
properties to be exchanged must be of like kind, that is, both the old property and the new property
to be acquired must
be real property as opposed to personal property. The properties
may be either land, commercial or rental incomes property (in certain cases,
vacation and personal residential property also qualify).
You can exchange any type of real estate for any other type of
real estate. For example, office buildings could be sold and
apartment buildings purchased or an industrial complex sold and raw land
purchased. The buying and selling transactions can be separate
events involving different parties, just as they would be in any
typical real estate sale and repurchase.
Money: During the exchange, as a party, you cannot take possession of the money. By
the IRS rules,
the proceeds from the sale of your old property must be held by
a "Qualified Intermediary" until the necessary aspects
of the exchange have been completed, neither can you
have a friend, employee, broker or even your CPA or attorney
hold the money for you.
Reinvestment: To avoid all taxable gain, you must reinvest
all the cash proceeds from the sale and buy property of equal or greater
value within the time periods specified.
Additional
Exchange Opportunities
Exceptions to
the three property rule:
Identify more than just three properties.
Reverse exchanges: Purchase a new property before selling your
old one.
Construction exchanges: Buy bare land and develop it
within the 1031 guidelines.
Primary residence 1031 exchanges: Exchange all or part of
your personal residence by following the 1031 guidelines.
PLEASE BE ADVISED THAT
NOTHING HEREIN IS TO BE CONSIDERED TAX OR LEGAL ADVICE. IF TAX
OR LEGAL ADVICE IS NEEDED, AN ATTORNEY, ACCOUNTANT OR OTHER
QUALIFIED COUNSEL SHOULD BE OBTAINED.
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