When you sell a piece of real estate the value of which has appreciated overtime, you have to pay a lot of taxes. After all you can’t really fully benefit from your real estate investment without paying taxes, can you? Actually, you can.
Back in 1921 Congress concluded that an investor simply switching from one property to another was only continuing the same investment and should not incur a taxable event. They called this a 1031 like-kind exchange. So, when you sell a piece of real estate and purchase a new one of at least equal value, you can defer tax payments. The key, follow the regulations.
First, choose a qualified intermediary or ‘QI’ such as Accruit, to process the exchange of properties. Next, transfer the property your relinquishing through the QI to the buyer. The QI holds the funds on your behalf for the time of sale to the time of purchase. Within 45 days, settle on possible new properties and within 180 days close on the replacement property which the QI acquires with the money held from the initial sale. The new property is transferred through the QI to you investor completing the task exchange between you and the QI.
When you partner with a trustworthy and experienced QI 1031 exchanges allow you to defer taxes that can otherwise eat up to a third of your profit. To speak to the leader in 1031 exchanges contact Accruit today.