1031 Tax Exchange

Also called a like-kind exchange. An exchange in which tax benefits are available to real estate owners planning to sell their investment, rental, business or vacation real estate, and reinvest the net proceeds in other real estate. Real Estate held for these purposes are called like-kind/1031 properties. Property owners may sell like-kind properties and defer taxes on the sale's profits by meeting the requirements of Internal Revenue Code (IRC) 1031 exchange. The purpose of the 1031 exchange is to allow sellers of like-kind property to buy replacement property of like-kind within a specific time period and defer taxes. The deferred profit tax benefit applies despite a time lapse between the sale of the taxpayer's former property and his purchase of replacement property. This sell-now, buy-later situation is called a delayed exchange. The 1031 exchange applies only to property other than the personal residence or dealer property. Specifically included for exchange are properties used or held for rental income, business purposes, investment, or as vacation homes. Taxwise, investment properties include vacant land held for profit, ground leases and management-free triple net lease. An owner of these qualifying like-kind properties can complete a 1031 exchange, but he must follow the to time constraints. A 1031 exchange differs from the more informal 1034 tax deferred rollover, which applies to a personal residence and has more lenient deadlines. Unlike a 1034 rollover, a 1031 exchange has different deadlines and other criteria. The replacement property must be acquired before 45-day and 180-day deadlines have run.

Selling tax free is simple when you follow the steps and when you have experienced agents walking you through the process. We'll be there for you at every phase in your transaction. For your convenience, we've provided the following checklist to walk you through the basic exchange process. Happy exchanging!

*Please note that the information provided below is for informational purposes only with ther understanding that myself Leonardo Gonzalez nor Century 21 All Real Estate is engaged in rendering legal, tax or financial advice. If legal or other expert assistance is required you should contact your attorney or CPA.

1. Consult your 1031 Exchange Company regarding your specific property and situation. If you do not have an exchange comapny we can refer you to a reputable 1031 tax exchange company. We'll review the transaction with you and your tax and/or legal advisors.
   
   
2. Sell your relinquished property. We will aggresively market and price your home to get you the most money for your property.
   
   
3. Open your exchange as soon as you have your property under contract. You can submit the information.                                                   
4. Sit back. From here, your 1031 Exchange  team will do all the work. We will coordinate everything with the escrow company the agent whom you are purchasing your new property from and your exchange team.
   
   
5. Sign your exchange documents.
   
   
6. Close on the sale of your relinquished property. The exchange proceeds are wired to your exchange company to be safely held in a trust account. You'll should be e-mailed a ledger of your account within 24 hours of receipt.
   
   
7. Countdown begins. Your exchange period begins when you close on your relinquished property. You have 180 days to complete your exchange (or until the date your tax return is due, whichever is earlier).
   
   
8. Identify your replacement property. Be certain to indentify your replacement property(ies) within your 45 day identification period.
   
   
9. Purchase your replacement property. Remember to notify the sellers in the contract that you are completing your 1031 exchange (with seller's cooperation and at no additional cost to the sellers).
   
   
10. Notify us when you are under contract for your replacement property.
    
    
11. Relax. Once again, we'll work with all parties involved to ensure you complete all the exchange documents as required.
    
    
12. Sign your exchange documents and the Client Authorization Form allowing your exchange company to release your exchange funds to the closing agent.
    
13. Close on the purchase of your replacement property. Your 1031 Exchange company will wire your exchange proceeds to the closing officer.
    
    
14. Celebrate! Congratulations. If all the exchange requirements were met, you've just successfully sold your real estate tax free. We can't wait to help you do it again!

CALL US FOR A FREE EVALUATION OF YOUR SAN DIEGO INVESTMENT PROPERTY

619-709-2042

LEONARDO.GONZALEZ@CENTURY21.COM