Are you tired of capital gains taxes leeching away your profit margin? Discovering the secret of 1031 exchanges will allow you to increase the profits on your real estate investments by avoiding paying these taxes. Best of all, you can accomplish this legally! These transactions are known as 1031 exchanges because, to legally avoid capital gains taxes, or sharing profits with the federal government, investors must meet every condition listed in Section 1031 of the Internal Revenue Code. Because these requirements are quite complicated, wise real estate investors will use an accountant, and possibly a tax attorney, as well, to review each sell to make sure that it complies with these conditions.
Although the stipulations are quite detailed, the process is simple for even a new investor to understand. To comply, you must first make a sale. Identify an agent, known as the intermediary or accommodator, which will help you make the exchange. Within 45 days after closing, you must identify another property for which you wish to make the exchange transaction. Be aware, however, that the transaction for this property must be completed within six months. In addition, all of the proceeds from the first sale must be used to make the second purchase.
The property purchased must be valued as highly or more highly than the first. Finally, the investor must hold at least as much debt against the second property as he or she did against the first. If you want to be a savvy real estate investor, you will quickly learn the secrets of 1031 exchanges. You can continue to use these tax-free changes until you stop exchanging properties for investment. If you plan properly, you should never have to worry about paying these taxes. Keep the profits from your real estate investments for yourself; stop donating them to Uncle Sam!
No comments:
Post a Comment