Florida1031.com: 1031 Exchange Explained

Florida1031.com: 1031 Exchange Explained

Call (312)612-1031 For Your Florida Replacement Property

Florida1031.com: 1031 Exchange Explained

Florida1031.com: 1031 Exchange Explained

Investors can trade up, consolidate, diversify, leverage or relocate their investments and not be penalized by having to pay either capital gains or recapture (the amount deducted while owning the property is taxable if the property is sold) by using a 1031 exchange.

An example would be an apartment owner wanting to trade into net lease properties that do not require management.

What are the general guidelines for a 1031 Exchange?

The value of the replacement property must be equal to or greater than the value of the relinquished property less any selling expense.*

The equity in the replacement property must be equal to or greater than the equity in the relinquished property.

All of the net proceeds from the sale of the relinquished property must be used to acquire the replacement property. Constructive receipt of sales proceeds is prohibited during the exchange process.

Deadlines for identifying and closing on the replacement property must be followed. From the close date there are 45 days to identify the properties to be purchased and 180 days to complete the purchase (or the due date for your tax return-whichever is earlier). Property is properly identified only if you clearly describe it in a written document signed by you and hand delivered, mailed, faxed to the person obligated to transfer the replacement property to you (typical a Qualified Intermediary (QI) or to any other person “involved in the exchange” other than you or any one disqualified under Treasury Regulation 1.1031 (k)-1(K).

If there is debt on the property being sold that amount needs to be replaced by new debt or cash from the investor‘s pocket.

How Many Properties May Be Identified as Replacement Properties?

Three Property Rule: Any three properties of any value.

200% Rule: Any number of properties not to exceed 200% of the sold property.*

95% Rule: Any number of properties of any value. 95% of identified properties must be closed in 180 days or the exchange will be disallowed.

Can Multiple Owners of a Single Property Exchange into Different Properties?

If the intent of varies owners of a single properties is to go their separate way it is important to first review with legal counsel the manner in which the property title is held before selling. Once the property being sold is closed and all exchange investors have entered into one exchange agreement the exchangers lose their options to divide the proceeds and buy separate replacement properties.

Does the Investor have Access to the Sale Proceeds During the Exchange?

Part of doing an exchange is that the investor does not take constructive receipt of the sales proceeds. The taxpayer may not receive the proceeds or take constructive receipt of the funds in any way, without disqualifying the exchange.

Is it too late to start a tax-deferred exchange after signing the sales contract before closing?

No, as long as title has not been transferred. The definition of like-kind for personal property and equipment is much narrower than for real estate.

What is the difference between “realized” gain and “recognized” gain?

Realized gain is the increase in the taxpayer’s economic position as a result of the exchange.

Linton Global Real Estate
Investors can trade up, consolidate, diversify, leverage or relocate their investments and not be penalized by having to pay either capital gains
2422 South Atlantic Ave
Daytona Beach Shores, Florida
32118
Phone: (312)612-1031

Florida1031.com: 1031 Exchange Explained