What is a 1031 tax-deferred exchange for Real Estate?
1031 Exchanges allow investors to sell property and reinvest the proceeds in another property without having to pay taxes that would otherwise be recognized gain from the sale (capital gains tax). The payment of such capital gains tax is deferred.
(Example: selling your 2 family income property in Arlington MA and purchasing a rental property in Osterville, MA)
A tax-deferred exchange is a method by which a property owner trades one or more properties for one or more replacement properties of "like-kind", while deferring the payment of federal income taxes and some state taxes on the transaction.
The logic behind Section 1031 is that when a property owner has reinvested the sale proceeds into another property, the economic gain has not been realized in a way that generates funds to pay any tax. In other words, the taxpayer's investment is still the same, only the form has changed (e.g. vacant land exchanged for apartment building or suburban 3 family exchanged for urban condominium unit).
What are the advantages of a 1031 Exchange?
How does the 1031 Exchange help the small long term investor? (ie: 2/3 family owner)
What is "Like-Kind"?
Does a vacation home qualify for exchange? (most popular question!!!)
What does a 1031 Exchange Cost?
Interested in finding out the answers to the above questions and how the 1031 tax exchange works? We are planning a complimentary 1031 tax exchange seminar with IPX Tax Exchange at our Cambridge Alewife office in March, 2014.
This is an overlooked advantage for the "average" investor that may be very beneficial when you go to sell. However, the key is understanding how the 1031 exchange works prior to listing/selling your property and purchasing the "replacement" asset. In most cases, once the sale has been recorded you cannot do a 1031 exchange.
for more information or to reserve a seat:
Contact: Judy Conley, Avenue 3 Real Estate, LLC