Created by the I.R.S. in 1990, section 1031 of the Internal Revenue Code allows taxpayers, with the aid of a Qualified Intermediary, to sell investment or income property solely for the purchase of other “like-kind” property within 180 days and to defer the capital gains taxes normally associated with such a sale. In essence, the taxpayer is exchanging one income property for another and deferring the gain in the process.

Known as a 1031 or a tax-deferred exchange, the use of this strategy can be utilized many times, allowing taxpayers to continue to defer gains throughout their lifetime and to accumulate more quality real estate.

With a 1031 Exchange, taxpayers can also consolidate, diversify, or convert the use of their  investment properties in preparation for relocation, retirement, or even setting up their heirs to inherit gain-free properties in the future. With some planning, the 1031 Exchange can be a perfect tool for acquiring an ideal retirement home or setting up an inheritance for one’s children.

One person you should know about is:

Craig Procter, the Vice President of Sales for Starker Services, Inc., the oldest and largest independently-owned Qualified Intermediary company in the country. Among the first to receive the CES (Certified Exchange Specialist) certification, Craig is a nationally-recognized speaker on the subject of real estate investment and an expert on 1031 Tax Deferred Exchanges. Since 1994, Craig has been providing exchange consultation services to create more awareness of this relatively unknown yet highly beneficial investment transaction.

I also know some local 1031 exchange services for your properties. These are common over the years to defer taxes and often investors start small in their investment career and build to larger and larger buildings over time while deferring taxes. Eventually investors may own many large apartment buildings. If you like this idea you should also look into Roth IRA’s to buy real estate.

learn how investors can upgrade properties, the tax benefits of an IRC 1031 exchange, and even how to increase leverage using the tax-free exchange.

Other subcategories may include:

• Common myths regarding IRC 1031 exchanges
• Boot, and how it works
• Debt relief
• Treatment of sales expenses
• Personal property issues
• Dealer status
• Sale or exchange of partnership interests
• Timing issues
• Determining the basis for exchange
• Avoiding recapture
• ‘Like kind’ rules
• Avoiding the ‘held for sale’ trap

Providing for the exchange of property held for productive use in a trade or business or for investment, reads as follows:

Nonrecognition of Gain or Loss From Exchanges Solely in Kind — No gain or loss shall be recognized if property held for productive use in trade or business or for investment (not including stock in trade or other property held primarily for sale, nor stocks, bonds, notes, chooses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest) is exchanged solely for property of a like kind to be held either for productive use in trade or business or for investment.Gain From Exchanges Not Solely in Kind — If an exchange would be within the provision of subsection (a), of section 1035 (a), of section 1036 (a), or of section 1037 (a), if it were not for the fact that the property received in exchange consists not only of property permitted by such provisions to be received without the recognition of gain, but also of other property or money, then the gain, if any, to the recipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property.Loss From Exchanges Not Solely in Kind — If an exchange would be within the provisions of the subsection (a), of section 1035(a), of section 1036(a), or of section 1037(a), if it were not for the fact that the property received in exchange consists not only of property permitted by such provisions to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized.
Basis– If property was acquired on an exchange described in this section, section 1035(a), section 1036(a), or of section 1037(a), then the basis shall be the same as that of the property exchanged, decreased in the amount of any money received by the taxpayer and increased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized on such exchange.More info on IRS websitehttp://www.irs.gov/newsroom/article/0,,id=179801,00.html
If you want to be put in touch with a local 1031 intermediary in Minnesota, please email me at ron@minnesotainvestors.comPlease do me a favor and tell just 3 friends today, to subscribe to this daily blog feed by going here:
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