A lot of investors don’t know but they can defer some capital gain taxes and obtain cash for the remaining amount while selling property in a 1031 exchange.
An investor pays taxes on the debt obligations related to replacement property or the cash proceeds received. In both of these events, the investors receive a boot. A boot means a property that an investor receives during the exchange and is not considered like-kind. Receipt of cash is referred as cash boot.
The exchanger can receive the cash proceeds after purchasing the identified property. It can also be purchased after the exchange period finishes in case there are some properties that were identified but not bought. If the exchanger asks the closing officer for disbursing a fixed dollar amount related to proceeds, then also cash proceeds can be received by the exchanger.
It is advised to avoid doing an exchange if the boot is more than the amount of capital gain.
If you are a real estate investor looking for investment property in Massachusetts, you can connect with FAI Exchange for the same. This company offers exchange properties for 1031 in the form of Delaware Statutory Trust (DST). You can also get an advice on a partial exchange through the experts.
Learn more about the DST investments and 1031 exchange by visiting this link. You can call the representatives of the company directly to clarify your doubts: (888) 669-3332
The company also answers the queries via email: WLM@SNETINVEST.COM.
The most common form of exchange related to 1031 in real estate sector is delayed exchange. A lot of individuals believe that it is the only form of exchange for the investors. To defer capital gains tax, the investors can exchange the properties through several exchange types.
The major types of exchange process include:
In this type, an investor purchases a replacement property after selling the relinquished property. After selling his/her property, the investor gets a time frame of 45 days to identify replacement property.
It is a process in which two investors directly swap the properties. A QI (Qualified Intermediary) is not needed for this exchange. There is no monetary exchange in this exchange and the process is considered quite difficult.
The investor can upgrade the replacement property to raise its value before making an exchange. The other features are similar to delayed exchange.
An investor can acquire the new property before selling the existing property in this form of exchange. There are some strict guidelines linked to the reverse exchange that an investor should follow.
Personal property exchange
This 1031 exchange process involves an exchange of personal asset against another asset of like-kind. The intangible assets include business licenses, copyrights, website URL, whereas the tangible assets include artworks, livestock, and vehicles.
If you are searching replacement property for 1031 real estate exchange, contact FAI Exchange for this purpose. For all the details, visit this link.