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1031 Tax Deferred Exchange
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A 1031 tax deferred exchange is the sale of an investment or business property that is followed by an acquisition of
another "like kind" property without incurring any current capital gains tax on the first property. All requirements
of the IRC 1031 must be met to ensure no tax liability. A few key elements and requirements of a 1031 tax deferred
exchange are as follows:
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A multiple property exchange such as the sale of one property to acquire more than one property or the sale of more
than one property to acquire one property is permitted.
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In all cases, the acquired property must be of equal or higher value and all cash proceeds must be
applied to the newly acquired property.
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A qualified intermediary or accommodator must be used to acquire the exchanger's property and transfer
replacement property to the exchanger.
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The exchanger will have a maximum of 180 days from the closing
of the initial sale to complete the exchange. Within the first 45 days of this period the exchanger must
identify up to three properties regardless of value or a group of properties with a combined value that
does not exceed 200 percent of the value of the initial property sale. Identified properties may be changed,
in writing, within the 45 day identification period.
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New construction may qualify for exchange property, but all costs incurred after the 180 day exchange period
will not count as reinvestment of exchange proceeds.
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Any kind of real property can be exchanged with any kind of real property to meet the "like kind" exchange
requirement with the following exceptions: (a) properties must be in the United States; (b) primary personal
residences are not eligible, however the sale of a farm property that includes a primary personal residence
can utilize the exclusion of up to $500,000 of gain for a married couple filing jointly for the sale of the
personal residence portion of the sales price, as well as the 1031 rule for the portion allocated to the farm
property.
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As a full service commercial real estate company, ARKANSAS COMMERCIAL assist their clients through the
entire process of the tax deferred exchange process by: (1) Assisting the Client in determining the fair
market value of their current property; (2) Listing and completing the tax deferred sale of their current
property; (3) Assisting the client in identifying a qualified accommodator to serve as the intermediary:
(4) Identifying potential "like kind" exchange properties that meet the clients needs for an investment
property; (5) Completing the purchase of the new investment property.
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