Tag: 1031 like-kind exchange

When you sell a piece of real estate the value of which has appreciated overtime, you have to pay a lot of taxes. After all you can’t really fully benefit from your real estate investment without paying taxes, can you? Actually, you can.
Back in 1921 Congress concluded that an investor simply switching from one property to another was only continuing the same investment and should not incur a taxable event. They called this a qualified intermediary or ‘QI’ such as Accruit, to process the exchange of properties. Next, transfer the property your relinquishing through the QI to the buyer. The QI holds the funds on your behalf for the time of sale to the time of purchase. Within 45 days, settle on possible new properties and within 180 days close on the replacement property which the QI acquires with the money held from the initial sale. The new property is transferred through the QI to you investor completing the task exchange between you and the QI.
When you partner with a trustworthy and experienced QI Accruit today.

When you sell a piece of real estate the value of which has appreciated overtime, you have to pay a lot of taxes. After all you can’t really fully benefit from your real estate investment without paying taxes, can you? Actually, you can.
Back in 1921 Congress concluded that an investor simply switching from one property to another was only continuing the same investment and should not incur a taxable event. They called this a qualified intermediary or ‘QI’ such as Accruit, to process the exchange of properties. Next, transfer the property your relinquishing through the QI to the buyer. The QI holds the funds on your behalf for the time of sale to the time of purchase. Within 45 days, settle on possible new properties and within 180 days close on the replacement property which the QI acquires with the money held from the initial sale. The new property is transferred through the QI to you investor completing the task exchange between you and the QI.
When you partner with a trustworthy and experienced QI Accruit today.

Since 1921, the rules for qualifying and completing 1031 exchanges have gradually broadened and become less restrictive. Even so, there are do’s and dont’s, and several gray areas of which taxpayers should be aware. A Qualified Intermediary (QI), like Accruit, is accustomed to dealing with all types of complex exchanges, and wants to make sure that the complexity of an exchange doesn’t deter you from considering one. Your QI will help you put the pieces together to process an exchange successfully. 
For the taxable gain to be deferred, specific key requirements must be satisfied: 

Properties Must Be Exchanged 

There Must Be No Constructive or Actual Receipt of Exchange Funds 

Properties Must be “Like-Kind”  

Exchange Must Be Equal or Up in Value  

Taxpayer Must Follow Exchange Time Limit & Identification Requirement   

Properties Must Be Held for Business or Investment Purposes:

The relinquished property and the replacement property must be held for business or investment purposes. For example, a sale of business property is not required to be replaced with other business property; it can be replaced with investment property or vice versa.
There are no standard or specific 1031 exchange holding periods by which a taxpayer must abide for property to meet the definition of “like-kind” or held for investment or business use. The only exception is Section 1031 of the Tax Code, with certain limited exceptions, prohibits exchanges where the taxpayer intends to acquire replacement property from a related party. 
Related Party is defined in I.R.C. § 267(b) or 707(b)(1) and generally covers exchanges between family members as well as exchanges between other entities where there is a high commonality of ownership. Related Parties are discussed below.
Holding periods are, therefore, determined on a case-by-case basis regarding the taxpayer’s genuine intentions based in part on: 

Reasons for acquiring, holding, and disposing of the property. 

The taxpayer’s primary occupation. 

Previous 1031 exchange activity. 

Use of the property. 

Generally, the longer the holding period, the better. However, a taxpayer who is disqualified from utilizing the benefits of Section 1031 would not then qualify merely because of a long holding period. What the Code, the courts, and the I.R.S. want to prevent is taxpayers holding property primarily for sale and attempting to defer their taxes utilizing Section 1031 (e.g., a builder of residential subdivisions). 
1031 Exchange Related Party Rules 
When a taxpayer exchanges like-kind property with a related party, the exchange is subject to finding an exchange company well-versed in the complexities surrounding 1031 exchanges and the tax law considerations associated with them. As with all matters concerning 1031 exchanges, it is highly advisable to consult with an independent professional regarding any proposed transaction’s legal and tax consequences. 
To learn more about the considerations for deferral state tax, we offer a free, no-obligation consultation with one of our subject matter experts.

Since 1921, the rules for qualifying and completing 1031 exchanges have gradually broadened and become less restrictive. Even so, there are do’s and dont’s, and several gray areas of which taxpayers should be aware. A Qualified Intermediary (QI), like Accruit, is accustomed to dealing with all types of complex exchanges, and wants to make sure that the complexity of an exchange doesn’t deter you from considering one. Your QI will help you put the pieces together to process an exchange successfully. 
For the taxable gain to be deferred, specific key requirements must be satisfied: 

Properties Must Be Exchanged 

There Must Be No Constructive or Actual Receipt of Exchange Funds 

Properties Must be “Like-Kind”  

Exchange Must Be Equal or Up in Value  

Taxpayer Must Follow Exchange Time Limit & Identification Requirement   

Properties Must Be Held for Business or Investment Purposes:

The relinquished property and the replacement property must be held for business or investment purposes. For example, a sale of business property is not required to be replaced with other business property; it can be replaced with investment property or vice versa.
There are no standard or specific 1031 exchange holding periods by which a taxpayer must abide for property to meet the definition of “like-kind” or held for investment or business use. The only exception is Section 1031 of the Tax Code, with certain limited exceptions, prohibits exchanges where the taxpayer intends to acquire replacement property from a related party. 
Related Party is defined in I.R.C. § 267(b) or 707(b)(1) and generally covers exchanges between family members as well as exchanges between other entities where there is a high commonality of ownership. Related Parties are discussed below.
Holding periods are, therefore, determined on a case-by-case basis regarding the taxpayer’s genuine intentions based in part on: 

Reasons for acquiring, holding, and disposing of the property. 

The taxpayer’s primary occupation. 

Previous 1031 exchange activity. 

Use of the property. 

Generally, the longer the holding period, the better. However, a taxpayer who is disqualified from utilizing the benefits of Section 1031 would not then qualify merely because of a long holding period. What the Code, the courts, and the I.R.S. want to prevent is taxpayers holding property primarily for sale and attempting to defer their taxes utilizing Section 1031 (e.g., a builder of residential subdivisions). 
1031 Exchange Related Party Rules 
When a taxpayer exchanges like-kind property with a related party, the exchange is subject to finding an exchange company well-versed in the complexities surrounding 1031 exchanges and the tax law considerations associated with them. As with all matters concerning 1031 exchanges, it is highly advisable to consult with an independent professional regarding any proposed transaction’s legal and tax consequences. 
To learn more about the considerations for deferral state tax, we offer a free, no-obligation consultation with one of our subject matter experts.

Since 1921, the rules for qualifying and completing 1031 exchanges have gradually broadened and become less restrictive. Even so, there are do’s and dont’s, and several gray areas of which taxpayers should be aware. A Qualified Intermediary (QI), like Accruit, is accustomed to dealing with all types of complex exchanges, and wants to make sure that the complexity of an exchange doesn’t deter you from considering one. Your QI will help you put the pieces together to process an exchange successfully. 
For the taxable gain to be deferred, specific key requirements must be satisfied: 

Properties Must Be Exchanged 

There Must Be No Constructive or Actual Receipt of Exchange Funds 

Properties Must be “Like-Kind”  

Exchange Must Be Equal or Up in Value  

Taxpayer Must Follow Exchange Time Limit & Identification Requirement   

Properties Must Be Held for Business or Investment Purposes:

The relinquished property and the replacement property must be held for business or investment purposes. For example, a sale of business property is not required to be replaced with other business property; it can be replaced with investment property or vice versa.
There are no standard or specific 1031 exchange holding periods by which a taxpayer must abide for property to meet the definition of “like-kind” or held for investment or business use. The only exception is Section 1031 of the Tax Code, with certain limited exceptions, prohibits exchanges where the taxpayer intends to acquire replacement property from a related party. 
Related Party is defined in I.R.C. § 267(b) or 707(b)(1) and generally covers exchanges between family members as well as exchanges between other entities where there is a high commonality of ownership. Related Parties are discussed below.
Holding periods are, therefore, determined on a case-by-case basis regarding the taxpayer’s genuine intentions based in part on: 

Reasons for acquiring, holding, and disposing of the property. 

The taxpayer’s primary occupation. 

Previous 1031 exchange activity. 

Use of the property. 

Generally, the longer the holding period, the better. However, a taxpayer who is disqualified from utilizing the benefits of Section 1031 would not then qualify merely because of a long holding period. What the Code, the courts, and the I.R.S. want to prevent is taxpayers holding property primarily for sale and attempting to defer their taxes utilizing Section 1031 (e.g., a builder of residential subdivisions). 
1031 Exchange Related Party Rules 
When a taxpayer exchanges like-kind property with a related party, the exchange is subject to finding an exchange company well-versed in the complexities surrounding 1031 exchanges and the tax law considerations associated with them. As with all matters concerning 1031 exchanges, it is highly advisable to consult with an independent professional regarding any proposed transaction’s legal and tax consequences. 
To learn more about the considerations for deferral state tax, we offer a free, no-obligation consultation with one of our subject matter experts.

Like-kind exchanges provide benefits to sellers of agricultural property under 1031 like-kind exchange. The fact is you can buy any real property such as farm, ranch, apartment complex, commercial building, or rental home used for trade, investment, or businesses purposes. These rules allow agricultural property owners to diversify their investments and grow a wider range of assets. Without 1031 tax deferred exchange, agricultural property owners will be held responsible for paying taxes on the property being sold, even if they reinvest and purchase new property.
What can Agricultural Property Owners Exchange with 1031?
Agricultural property owners can exchange labor, chemical, and water intensive land into less management intensive property such as residential or office condominiums. Or they can exchange conservation easements on their ranch land to acquire new property.
For example:
Recently a client sold two easements on his agricultural land. One of the easements restricted his ability to use the wells on his land. This helps keep water in the underground aquifers and permits more water to flow further downstream for other users. The second easement restricted his ability to use chemical fertilizers on his land. The societal benefit here is that fewer chemicals being applied to the land mean fewer chemicals running into the streams, polluted the water, and killing the fish. The cash generated by the sale of the easements was used to acquire a few single-family homes nearby, which will be used as VRBO/Airbnb type rentals.
 
Time is of the essence when it comes to Selling and Obtaining Real Property
Timing is crucial when it comes to selling and acquiring real property in a Section 1031 gives the seller 180-days to replace their property when exchanging into another real property.
Why am I doing a 1031 tax deferred exchange?

Diversify your portfolio

Rather than having all of your funds locked into one large property, you can reinvest into multiple properties of different asset classes (residential, commercial, retail, etc.).
Rather than having all of your funds locked into one location, you can reinvest across town, or across the country, to take advantage of stronger opportunities.
Spread assets into smaller investments as party of an estate plan.

Upgrade or consolidate your portfolio

Rather than having your investments scattered across the county, consolidate into fewer, larger properties.

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