1031 Exchange Options
Investors don't like capital gains taxes, which only eat away at their bottom line. Any strategy or program to reduce such taxes are popular with investors. A savvy real estate investor uses the 1031 exchange option. The 1031 exchange program allows an investor to defer capital gains by reinvesting all proceeds of the previous sale into a replacement property. There are three main qualifications for the 1031 exchange option.
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Requirements
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The main qualification is that the replacement property be of like kind or greater value. This reinforces the use of all profits made from the replace property.
Replacement Property
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Another essential requirement of the 1031 exchange option is that the investor must identify three potential replacement properties within 45 days from the close of the replaced property, and the closing must occur within 180 days of this date. If an investor fails to follow these essential rules, the option to use the 1031 exchange becomes unavailable.
Qualified Intermediary
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Find an intermediary. The IRS requires that real estate investors use a Qualified Intermediary (QI) to conduct the 1031 exchange. This person must be an independent party, not your accountant, attorney, broker, or employee.
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