The Mechanism of 1031 Tax Deferred Exchange

When an investor sells the property (relinquished property) in a 1031 tax deferred exchange, a Qualified Intermediary (QI) holds the funds gained from the sale. The investor then directs the QI to purchase a new property that is either equal or higher in value than that of a relinquished property. By this method, the investor is saved from paying the capital gain taxes that he otherwise would have had to pay over the sale of the relinquished property. Without 1031 like-kind exchange, the investor will always have to pay capital gain taxes every time he moves from one property to another. Additionally, saving up on capital gain taxes puts the investor on a better road to become wealthier.

 

Here are some things you should know about 1031 like-kind exchange:

  1. 1. Personal residences cannot be exchanged in a 1031 tax exchange. 1031 like-kind exchange is a provision for investment and business properties only.
  2. 2. You need to buy a replacement property that is equal or higher in value than that of a relinquished property.
  3. 3. You will need a Qualified Intermediary to carry out the 1031 like-kind exchange.
  4. 4. You are required to identify a new property after the closing of your relinquished property.
  5. 5. You are also required to close in on one or more identified properties within 180 calendar days of the closing of your relinquished property.

 

If you are looking for a 1031 exchange company in Massachusetts, look up to FAI Exchange.

 

FAI Exchange caters realtors and business property investors who are looking for ways to defer capital gain taxes. FAI Exchange’s skilled and talented staffs will always be there to explain you every aspect of 1031 like-kind exchange. Our services also include preparation of documents with all appropriate forms required for a smooth 1031 like-kind exchange to happen.

What Is A 1031 Tax Exchange and Who All Benefit From It?

Deferring capital gains taxes is no longer a problem. If you have heard about the 1031 tax exchange, you probably know how easy it is to defer capital gains taxes. With the introduction of 1031 tax exchange the rise in real estate businesses and property dealing businesses is prominent. With a 1031 tax exchange, you can easily sell your old property and buy a new one without paying capital gains taxes. However, there are certain criteria that you have to fulfill.

The 1031 tax exchange greatly helps realtors and business property investors. As these businessmen do not have to pay taxes, they are easily able to sell their old property and invest in a new one. This helps them stack up their profit in the coming years.

The 1031 tax exchange is a very easy process but involves the need for a Qualified Intermediary (QI). Once you meet the required criteria, you can proceed with selling your old property and the money you earn is kept with the QI you hire. This QI is then directed by you to purchase a new property.

There are certain things that you should keep in mind while dealing in a 1031 tax deferred exchange:

  1. The price of the new property that you buy should be equal or higher than that of your old property that you sell.
  2. After the exchange, you have 45 calendar days to identify a new property and you can identify up to 3 properties.
  3. You also are given a total of 180 calendar days to close in on your identified property.

With Fai Exchange, the entire process of 1031 tax exchange becomes a whole lot easier. We become your Qualified Intermediary and also help you in arranging the necessary documents for the exchange to happen.

Now Invest in Properties Without Worrying About Capital Gain Taxes!

Are you thinking about selling your old property and investing in a new property in Massachusetts? At the same time, you are worried about paying capital gain taxes? Well, no more. With 1031 tax-deferred exchange, you can easily move from one property to another without paying capital gain taxes. Many businessmen and realtors investing in properties are drawn toward 1031 tax-deferred exchanging and putting themselves on the road to wealth.

There a few conditions that you must fulfill to successfully complete a 1031 property swap and they are as follows:

  1. You must make sure that the property you purchase is equal or higher in value than the property you sell.
  2. You will also need a Qualified Intermediary (QI) to hold your funds and purchase a new property as directed by you.
  3. You will need to identify a new property within 45 days of the closing of your relinquished property (the property you sold).
  4. Finally, you will have to close in on one or more identified property within 180 days of the closing of the relinquished property.

Your investment in real estate property has got easier with 1031 exchange. If you are looking for investment in real estate property in Massachusetts, feel free to contact Fai exchange.

Save Capital Gain Taxes with 1031 Like-Kind Exchange

You no longer have to wonder about how you can defer capital gain taxes on your property. With 1031 like-kind exchange, real estate and property dealing businesses have grown tremendously. A 1031 tax exchange allows you to sell your old property and purchase a new one without paying any capital gain taxes.

How does this help realtors and business property investors? By not paying taxes, property owners are able to buy better properties which nets them better profit in the coming years.

A 1031 tax exchange is an easy process but requires your property to meet some criteria and the involvement of a Qualified Intermediary (QI). Your property should not be residential and must solely be used for trade or business investment only. Your property’s level of the sale price, equity, and debt level are also taken into account. Moreover, after selling your old property, the replacement property in 1031 exchange must be equal or higher in value than that of your old property.

Finally, you have 45 calendar days to identify a new property and a total of 180 calendar days to close in on the identified property.

With Fai Exchange, the entire process of 1031 like-kind exchange becomes a whole lot easier. We become your Qualified Intermediary and also help you in arranging the necessary documents for the exchange to happen.

How to Defer Capital Gain Taxes?

Capital gain taxes are levied whenever you sell a property. This can impact businessmen involved in property investment. That is why many realtors and business property investors look up to 1031 exchange.

The 1031 exchange allows realtors and business property investors to sell an old property and purchase a new property while deferring capital gain taxes. To do this, the owner of the property should purchase a property that is either equal or higher in the value of a selling property. The owner of the property must also hire a Qualified Intermediary (QI), who will purchase a new property for the owner as directed.

Fractional ownership of real estate can be described as a share in the ownership of a real property. It is usually seen when a property is too expensive, too big to be managed by an individual or any other legal reason. The property can be owned by 5 people, where each person shares the maintenance, taxes, and takes the turn to become the owner of the property.

Exchange fractionally owned real estate property is becoming a popular and effective business tool. But, it also comes with it is also extremely technical and maybe a task risk.

Investment in Real Estate Properties Got Easier with 1031 Exchange

Are you looking to sell your old property and invest in a new property? Are of concerned about paying capital gain taxes while selling your old property? The section 1031 is designed specifically for people like you. The 1031 exchange allows you to sell an old property and purchase a new one all while deferring capital gain taxes.

A 1031 tax-deferred exchange can only happen under appropriate conditions. You must make sure that the property you purchase is equal or higher in value than that of a property you sell. You will also need a Qualified Intermediary (QI), who will hold your funds and purchase a new property as directed by you. You will need to identify a new property within 45 days of the closing of your relinquished property (the property you sold). Finally, you will have to close in on one or more identified property within 180 days of closing of the relinquished property.

Your investment in real estate property got easier with 1031 exchange. If you are looking for investment in real estate property in Massachusetts, feel free to contact Fai exchange.

Delayed exchange vs. simultaneous exchange: What’s the difference?

There are several ways you can exchange your property in 1031 exchange process. Each method will help you defer capital gains taxes.

You might have heard about simultaneous exchange and delayed exchange. So, what exactly is the difference between them?

Simultaneous exchange

It is the oldest form of exchange. The properties are swapped directly among two investors. You don’t need a QI for this process. The deeds are literally exchanged in this process, along with other crucial documents. No monetary exchange is involved in this process. It is quite difficult to achieve because you can’t find someone easily with a property whose value is same.

Delayed exchange

It’s the most common exchange type, as of now. It’s common because the exchanger gets a lot of time to find the property and close it. The proceeds obtained after selling the property are kept by a third party known as a qualified intermediary (QI). These proceeds are used for buying the property you have designated. The exchanger gets 45 days to designate the property and 180 days to close it.

Due to the enormous time received by the exchangers, delayed exchange is usually preferred. There are also other forms of exchange in this process, including improvement exchange, personal property exchange, and reverse exchange.

All these exchange types come with their unique benefits. If you are looking for replacement property in the USA, you can choose them with the help of FAI Exchange.

The benefits of delayed 1031 exchange

When we talk about 1031 exchanges, we are generally talking about the delayed exchange. It’s in a delayed exchange that you need a QI and you get some time to find the replacement property.

Let’s have a look at the benefits of this exchange type.

After selling your existing property, you get enough time to find a replacement property. The property can be designated within 45 days. There is also 180 days for closing the property you have designated.

In the conventional exchange, also known as a simultaneous exchange, the properties are exchanged between two parties. But, here you call to sell your property to one party and purchase the replacement property from another.

And of course, this exchange helps you defer capital gains tax during real estate transactions. Make sure to take the support of only qualified intermediary to hold the proceeds from relinquished property.

There is a modified version of delayed exchange known as improvement exchange. In this process, improvement of the replacement property is done for increasing its value. The reconstructions and improvements have to be completed in not more than 180 of selling your old property.

We will keep on updating you about the different aspects of 1031 like-kind exchange. We are also there to support you when you require a replacement property. You can connect with us for DST investments that are eligible for the exchanges.

Delayed exchange is not the only 1031 exchange type

If you have basic knowledge of 1031 exchange process, you might be aware of the fact that the investor gets a window of 45 days to identify a property and 180 days to close it. This is one of the most popular forms of 1031 exchange to defer capital gains tax and is referred to as delayed exchange.

In this exchange type, you need a middleman (or qualified intermediary) who keeps the cash obtained after selling the home. This cash is used for purchasing replacement property to complete the exchange.

Well, there are also other methods that real estate investors use for 1031 exchange.

The oldest method is known as simultaneous exchange. In this exchange type, the properties are swapped simultaneously between the investors. And, as there is monetary exchange involved, you don’t require a QI. As it becomes difficult to execute this type of exchange, it has become unpopular among investors.

Some investors also exchange their property through improvement exchange. This exchange involves improvement of replacement property to increase its value. Improvements and reconstructions have to be done within 180 days of selling the relinquished property.

Personal property exchange is another method to swap a personal asset for another of the same kind. The assets include artworks, livestock, business licenses, website url, and copyrights. The time-frame is 180 days.

There’s also a reverse exchange process used by some investors. The investor acquires the replacement property before selling his asset.

Tax exchange and other benefits of 1031 exchange

When we think of 1031 exchange, the first thought that comes to mind is that helps deferring the capital gains tax related to real estate investments. But, this is not the only benefit of 1031 tax exchange. Confused?

Ok, without further ado, let us discuss some other benefits you can enjoy if you indulge in 1031 exchange.

You can increase your regular income
If you are an owner of a vacant land that’s not drawing you any income on a regular basis, then you can think about exchanging it. You can swap it for residential or commercial real estate to get returns in the form of rents.

Consolidate your property
When an investor owns multiple investment properties, if often becomes challenging for him/her to manage the real estate. The investors can use 1031 exchange to own a single property instead of multiple small-sized properties.

Diversify the portfolio
Some individuals do the exact opposite of what we have discussed above. They sell their single property to acquire different property types.

Fractional real estate ownership
This is applicable if you are planning to invest in DST (Delaware Statutory Trust) property. A DST property has multiple owners, which decreases the amount to need to pay to get a share of property. It also reduces the burden or managing the property and lets you further diversify the portfolio.

If you are interested in fractional real estate ownership through 1031 exchange, connect with FAI Exchange. They will find you a DST investment according your budget and needs.