1031 Tax Exchange 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.

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. 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.

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!

Rules, Forms, & Guidelines from the IRS

• Publication 544: Sales and Other Disposition of AssetsForm 8824: Like-Kind Exchanges
• Like-Kind Exchanges: Frequently Asked Questions Like-Kind Exchanges: Real Estate Tax
• Tips Internal Revenue Code, Part 1: Income Taxes – Scroll down to access section 1.1031 et seq.
• Rev. Proc. 2002-22: Undivided fractional interests in real estate – Scroll to page 733.

For more information call Colleen Kulikowski

(716) 650-0051

 

Thinking of selling your Western New York home? Interested in finding out the current market value of your single family home, condo or investment property? Then call www.BestBuffaloHomes.com at (716) 650-0051 to discuss what is happening in today’s Western New York Real Estate Market. We would be happy to give you a personalized Comparative Market Analysis for your home or assist you to purchase a home. View additional WNY Market Area Statistics here.

Thinking of selling your Western New York home? Interested in finding out the current market value of your single family home, condo or investment property? Then call www.BestBuffaloHomes.com at (716) 650-0051 to discuss what is happening in today’s Western New York Real Estate Market. We would be happy to give you a personalized Comparative Market Analysis for your home or assist you to purchase a home. View additional WNY Market Area Statistics here.

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All Statistics are gathered from the Buffalo Niagara Association of REALTORS®.