| Tenants In CommonDelaware Statutory Trust1031 Exchange |
When selling an investment property, consider this powerful tax deferral tool.
Section 1031 of the Internal Revenue code allows investment property owners to sell a property and defer tax payments by reinvesting the proceeds into a "like-kind" investment property (or properties).
What types of investment properties are appropriate to complete a 1031 exchange?
Any property held for use in a trade or business, or for investment may qualify. Here are two popular choices:
- Tenants In Common investments allow investors to defer capital gains taxes, and to invest in larger, institutional-grade properties.
- Delaware Statutory Trusts offer many of the benefits of a Tenants In Common investments, often with lower minimum investments.
What are the rules of a 1031 exchange?
- Your new property must be of equal of greater value.
- You must reinvest all of the equity from your old property into your new property.
- For tax deferral on all capital gains, you must not directly receive any funds from the sale. You can receive funds from the sale, but will pay taxes on any funds received.
- You must identify a replacement property within 45 days of the close of escrow on the old property.
- You must close on the new property within 180 days of the close on the old property. (TIC investments can be ideal choices as they close quickly.)
What are the potential benefits of a 1031 exchange?
- Investors can defer capital gains and depreciation recapture taxes.
- Investors can harvest dormant equity at predictable intervals to maximize the inherent benefits of real estate investments.
- Depending on the specifics of your particular 1031 exchange, the tax dollars you defer can be invested elsewhere, potentially increasing cash flow and net worth.
- If you choose to structure your 1031 Exchange as a Tenants In Common or Delaware Statutory Trust investment, you can eliminate the headaches of day-to-day property management.
Completing your 1031 exchange
To fully understand your particular 1031 exchange situation, it is best to speak with a qualified, experienced professional.
An INVERNESS Real Estate Investment Consultant can help you explore your options, and guide you through the entire process.
To fully understand your particular 1031 exchange situation, it is best to speak with a qualified, experienced professional.
An INVERNESS Real Estate Investment Consultant can help you explore your options, and guide you through the entire process.
Investors can harvest dormant equity at predictable intervals to maximize the inherent benefits of real estate investments.