1031 Tax Exchanges | The Basics

Federal and State Capital Gain Taxes can be costly!

A 1031 exchange can defer the capital gain taxes that are due when you sell property that has increased in value or been depreciated for tax purposes. Section 1031 of the U.S. Internal Revenue Code allows investors to defer capital gains taxes on the exchange of like-kind property. A 1031 Tax Exchange, or tax-deferred, exchanges hold great advantages for real estate investors.

Basically you should never have to pay income taxes on the sale of property if you reinvest the proceeds in another Downtown Buffalo property.

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Reasons to change property vary with Downtown Buffalo Investors. We know the basics about tax-deferred exchanges, but you should consult with your Financial Advisor to explain and map out your plan for using a 1031 Tax Exchange before you engage in a Downtown Buffalo Real Estate Transaction. Your Financial Professional and our Real Estate Team can work towards your financial goals in you Downtown Buffalo purchase.

The many rules and regulations on a 1031 Tax Exchange are strict and can be confusing. We suggest that you consult with your CPA or Financial Planner before we start.

Some Downtown Buffalo Properties that do not qualify for a 1031 Tax Exchange are:

• Construction

• Fix/Flips for Resale

• Inventory property

• Notes or Bonds

• Partnership interests

• Personal Residence

• Corporation common stock

There are Four Basic Types of 1031 Tax Exchanges:

• Simultaneous Exchange – no interval between the two closings.

• Delayed Exchange – there are rules and strict time line for this type of exchange.

• Reverse Exchange or Title-Holding Exchange – when the exchanged property is purchased prior to the first property’s closing

• Improved Exchange – You acquire a property, schedule construction of improvements and then receive the property as an exchange.

As with all investments, please check with your Financial Advisor for more information on 1031 Exchanges. Then call us to find the perfect Downtown Buffalo property!