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)
Over the last week, 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 are not aware of any extensions of the 1031 exchange time deadlines at this time. Taxpayers currently in a 1031 exchange should plan to proceed as usual and follow the normal time deadlines until further notice.
An extension of the 1031 exchange 45-day and 180-day time deadlines requires a Presidentially declared disaster. In the event of a federally declared disaster, a taxpayer may be eligible for an extension of time deadlines in a 1031 exchange. Generally, to qualify for an extension, the deadline must fall on or after the date of the Federally declared disaster. Presidentially declared disasters are normally specific to affected areas which are generally specific counties identified in a published IRS notice. The IRS notices generally state which counties have been affected and the type and duration of relief that is to be provided. In the past, it has generally been the practice of the IRS to issue guidance shortly after a Presidential declaration acknowledging specifically what may qualify for disaster relief.
For exchangers to obtain extensions, the notice must specifically mention IRS Rev. Proc. 2018-58 section 17 (which supersedes IRS Rev. Proc. 2007-56, section 17), of which provides that an “affected tax-payer” may be eligible for a time extension for the later of 120 days or the date listed on the IRS Notice. If the 45-day period had expired before disaster declaration the exchanger would only be able to extend the 180-day deadline, unless identified property was substantially damaged. Click here to learn more about tax relief in disaster situations.
While some exchanges could potentially be eligible, other exchanges may not be eligible. Exchangers and their advisors should carefully review any IRS notices regarding extensions and make determinations regarding extensions accordingly.
Most recent developments:
The News Release issued by the CA Franchise Tax Board (FTB) extends the due date for multiple taxes, including non-wage withholding, to July 15, 2020. GAC has confirmed with the FTB that this extension includes filing of Form 593 and payment of real estate withholding. Questions can be directed to Patricia Carte at email@example.com.
IRS Notice 2020-18 extended tax filing deadlines but did not include extensions of any 1031 deadlines. We are monitoring this situation closely and will update as new developments arises.