1031 Exchange Selling Real Estate in Los Angeles Without Paying Taxes
“The hardest thing in
the world to understand
is the income tax.”
1031 Exchange also known as the Starker Exchange lets real estate investors / real estate sellers defer capital gains taxes on investment real estate
The complete tax guide for real estate investing: A step by step plan to limit your taxes legally
Jackie V – 1031 Exchange – Los Angeles
Under Section 1031 of the United States Internal Revenue Code (26 U.S.C. § 1031), the exchange of particular kinds of properties and investment real estate properties that the seller may defer the realization of capital gains taxes or losses due at sale, therefore defer any capital gains taxes due. In 1979, this was expanded by the courts to include non-simultaneous sale and purchase of real estate investment properties, what is also known as Starker exchange.
To qualify for a 1031 of the Internal Revenue Code, the properties exchanged must be held for productive use in a trade or business or for investment. The Jvalen Group specializes in Real Property, Real Estate 1031 exchanges. The properties exchanged must be of “like kind”, of the same nature or character, even if they differ in grade or quality.
Real Estate, Real properties generally are of like kind, regardless of whether the properties are improved or unimproved – vacant land. The real estate must be located in the United States.
Personal property such as equipment used on a property are included in the lump-sum sale of the property, and if they are able to be deferred. Under Treasury regulation §1.1031(k)-1(c)(5)(i), property that is transferred together with the greater articles of worth that does not exceed 15% of the fair-market-value of the bigger property does not need to be acknowledged within the 45 day identification time period but still needs to be exchanged for like kind property to defer gain.
Cash to level a deal cannot be deferred under Code Section 1031 because it is not of like the type. This cash is called “boot” and is taxed at a normal capital gain’s rate.
If liabilities assumed by the buyer go beyond those of the seller (taxpayer), the realized gain of the seller will not only be realized, but recognized as well. If however, the seller assumes a bigger liability than the buyer, the realized loss cannot offset any realized and recognized gain of receiving boot such as cash or other personal property considered boot.
TIME REQUIREMENTS IN AN EXCHANGE 1031 LOS ANGELES
From the time of closing on the relinquished property, the investor has 45 days to choose a potential replacement properties and a total of 180 days to closing and acquire the replacement property.
Identification requirements: The investor must identify the replacement property before midnight on the 45th day. The investor normally selects three potential properties of any value, and then usually buys one or more of the three within 180 days. Typically, a common address or an unequivocal description will suffice. If the investor needs to pick out more than three pieces of real estate, it is advisable to consult with your 1031 facilitator.
1031 Exchange Los Angeles
Contact Jackie V if you have any questions regarding a 1031 exchange.