The Rules and Requirements of a 1031 Exchange
A 1031 exchange Florida investors choose can be a complex procedure that involves a swap of one type of investment property for another similar property. The overall benefit is the ability to avoid capital gains taxes on the investment property. The following are a general overview of the rules and requirements. For further clarifications, call Calkain, a 1031 exchange intermediary.
Identifying the Property
After closing on your first property, you have 45 days to find up to three replacement properties. Their value does not matter. It is also possible to identify four or more investment properties so as long as the value doesn’t exceed 200 percent of the value of the relinquished property. If it is true that the value is greater than 200 percent, 95 percent must be purchased.
Purchasing the Replacement Property
The exchanger has a total of 180 days to purchase a new property. This period starts from the first day of closing on the sold property.
To defer 100 percent of the tax, the market worth of the sold property must be of equal or greater value to the relinquished property. If this is not true, the exchanger will be obliged to pay taxes on the difference. Furthermore any debt or equity associated with the replacement property needs to be of equal or greater value to the equity or debt of the sold property. Equity of the sold property can offset debt, but additional debt taken on will not offset equity.
There is no mandatory holding time in 1031 exchanges Florida regulates; however, the IRS may determine whether or not the property was acquired before the exchange. They might also asses to see if it was purchased to fix and sell or held as an investment property. In general the shorter the time period is, the more facts and exchanger might need to support their actual intent. A 1031 exchanges Florida broker can discuss this with you during a consultation.
It is possible to sell a property to a related party and purchase a similar property from a related party. If you plan on doing this type of transaction, you must follow very specific rules set forth by the IRS. For example a property must be held for at least two years before it can be sold to a related party. You can only purchase a new property from a related party when that party is also initiating a 1031 exchange. Related parties can include spouses, siblings, parents, aunts, uncles, cousins, ex-spouse, and so forth. If you are a corporation, LLC, or partnership with more than 50% of interest owned, you can also be considered a related party.
Eligible Property Examples for a 1031 Exchange
- Strip and shopping malls
- Golf courses
- Trailer parks
- Parking lots
- Self storage facility
- Convenience store
- Commercial buildings
- Rental properties
Properties Not Eligible for a 1031 Exchange
- Primary residence
- Stocks or bonds
- Partnership interests
Calkain: A 1031 Exchange Agent and Intermediary You Can Count On
To speak with a 1031 exchange Florida agent for more information, or to review available 1031 properties, call us today.
If you are considering doing a 1031 exchange Florida investors have success with, contact Calkain to discuss what your options may be. Our company has been assisting real estate investors for almost two decades and as a result we have built a solid reputation as the Florida 1031 exchange company to choose.
1031 Exchange Florida Residents Depend On
If you are considering a 1031 exchange in Florida, there are many companies you could turn to, but none have the experience and portfolio that Calkain offers its clients.
Under current IRS tax rules, when a person sells investment real estate, they have a tax obligation for the capital gains they have earned on the property. Although certain deductions can offset capital gains, an investor can still be left owing a good chunk of money to the government.
For example, if you spent funds remodeling and improving the property while you owned it, those expenses can be deducted from the profit you made when you sell it. However, those improvements most likely increased the value of the property which enabled you to sell it for more than what you paid for it. This all reflects in the capital gain you now owe.
But the IRS also lets you exchange that profit. Under a 1031 exchange Florida investors recommend, you can take funds from the sale of one property and use them to purchase another property and defer paying any capital gains tax on those funds. Instead of paying the money to the IRS, a 1031 exchange allows you to continue to use the money to make money for you.
There is no limit to how many times you can utilize the 1031 exchange rule. You can keep rolling over your money, deferring capital gains tax, and adding to your profits.
There are certain rules that are required in order to take advantage of the 1031 exchange. The first requirement is that within 45 days of the sale of your property, you must identify the replacement property you intend to purchase. This must be done in writing and given to an intermediary who will oversee the process. This is one of the many services Calkain offers its clients.
Once you identify the property you want to purchase, you only have 180 days from the day you passed papers on the sale of your property in order to finalize the deal. The 180 days countdown does not start on the day you identify this property, but on the day you sold your original property. For example, if you submitted your written intent 40 days after you sold your property, you have 140 days left to finalize the sale on the replacement property.
Also, if, after the sale of the replacement property, you still have funds left over from the sale of the original property, you may owe capital gains tax on the remaining balance.
1031 Exchange Florida Investors Trust
If you would like to learn more about what investment opportunity options are available, contact Calkain today. We would be happy to show you our entire portfolio of 1031 exchange Florida has to offer.1031 Exchange Florida