1031 Exchange

Imagine selling rental property or land, acquiring new real estate of any type and not paying one dime in capital gain taxes. Thousands of investors are profiting every day simply by using the tax-deferred sale IRS 1031.

A lot of investors continue to own certain property for more years then they care to, because they don't want to pay up to 40% taxes on their capital gains. During the years of ownership, many investors want to change the type of property they own due to relocation, desire to reduce management responsibilities, need for a higher cash flow or simply retirement.

Under the IRS Section 1031, investors have the option of moving their investments (and equities) into more desirable or profitable properties without paying any capital gain taxes. DeWaay Capital Management has years of experience with 1031 exchanges and welcomes the opportunity to answer your questions.

IRC 1031 Tax Exchange Do's And Dont's – Consider Your Tax Consequences First

DO Advanced planning for the exchange. Talk to your investment professional, accountant, attorney, real estate broker, lender and Qualified Intermediary.

DO Attempt to sell your property before you purchase. Occasionally, sellers find the ideal replacement property before a buyer is found for their relinquished property. If this situation occurs, a "reverse" exchange (buying before selling) is the only option available. Although there is considerable legal precedent for "reverse" exchanges. Sellers should be aware that by performing a reverse exchange, which currently has no clear IRS guidelines is considered a more aggressive exchange, and may trigger additional IRS inquires.

DON'T Miss your identification and exchange deadlines. Failure to identify within the 45 day identification period or failure to acquire replacement property within 180 day exchange will disqualify the entire exchange. Reputable Intermediaries will not act on back-dated or late identifications.

DON'T Plan to sell and invest the proceeds in property you already own. Funds applied toward property already owned is considered "goods and services", not "like-kind" property.

DON'T Dissolve partnerships or change the manner of holding title during the exchange. This change in the Seller's legal relationship with the property may jeopardize the exchange.

For more information on real estate exchanges contact DeWaay Capital Management at 800-722-9861.