Section 1031 of the Internal Revenue Code is one of the last great tax shelters available to investors today. When investment real estate is sold, the seller is responsible for paying capital gains taxes. In some cases, capital gains can be as high as 25 percent. By performing a 1031 exchange, investors can defer payment of these taxes.
As the name suggests, a 1031 exchange is the process of the property for sale being exchanged for a new piece of investment property. As long as this transaction is a “trade up” in value and debt, taxes are completely deferred.
By deferring taxes using a 1031 exchange, the wise investor is able to:
Increase cash flow;
Purchase property in a more favorable area; or
Diversify or consolidate property.
Real estate investors, now is your chance to build wealth with a 1031 exchange. 1031 Exchanges are easy and economical to complete.
Learn more about the types of exchanges available and, the applicable rules. Get started with your 1031 exchange today by calling us or by clicking the icons above.
DISASTER EXTENSIONS & CORONAVIRUS (COVID-19)
Midland 1031 has had numerous inquiries regarding the Coronavirus (COVID-19) outbreak and the potential impact on the 45-day identification and 180-day exchange deadlines in an IRC Section 1031 exchange. We now know that the IRS has issued Notice 20-23, announcing deadline relief for both 1031 like-kind exchanges and opportunity zone investments that are already underway.
1031 Like-Kind Exchanges: If an investor has taken the first step of a like-kind exchange by selling the relinquished property, and either the 45-day or 180-day deadline falls between April 1 and July 15, the deadline has been extended to July 15, 2020.
Opportunity Zones: If an investor who sold a capital asset planned to roll over the gain into an Opportunity Fund and the 180-day deadline falls between April 1 and July 15, they can make the investment as late as July 15, 2020.
Sole Proprietors’ Quarterly Taxes: Second quarter payments can now be made July 15, 2020. The IRS had already pushed first quarter payments to July 15. Any quarterly estimated tax payment due on or after April 1, 2020, and before July 15, 2020, can wait until July 15 to make that payment without penalty.
Exchangers and their advisors should carefully review any IRS notices regarding extensions and make determinations regarding extensions accordingly.
1031 Exchange FAQs
- Will my vacation rental qualify for a 1031 exchange?
- How do I calculate my capital gains?
- What are the timing rules?
- What is the most common pitfall to avoid?
- What is the same taxpayer requirement?
- You mentioned that there must be continuity of taxpayers from start to finish. Will I ever be able to make changes to the taxpayer on title?
- Are there any other benefits to doing a 1031 exchange beside tax-deferment?