For anyone who wants to complete a 1031 exchange and defer capital gains taxes on the sale and replacement of investment or business property, timing rules are critical to understand. One big one that often catches investors off guard has to do with elapsed time for the 1031 transactions. Internal Revenue Code requires that you identify your replacement property (or properties) within 45 days of closing on the sale of your old property. But how are those days calculated? The IRS is clear that the 45 days are calendar days, and no dates are excluded from the calculation. If your 45th day falls on a weekend or holiday, that day […]
If a 1031 exchange is on your horizon (and why not? It’s a great way to defer capital gains taxes), then understanding the rules of the game is not optional. The IRS is very strict about applying their rules that govern these amazing tax-deferral transactions. No surprise there. One of the most common pitfalls that I see in my work with clients on these type of real estate transactions? Missing the deadline to name possible replacement properties. You may know that you have 45 days from the date you sell your relinquished property to identify possible replacement property. But did you know that you can name more than one? And […]
Whether you are new to the world of real estate investing or are a seasoned veteran, the idea of a high return, low involvement investment opportunity is always difficult to ignore. And much of the time, these seemingly impossible investments are just that – smoke and mirrors. But not all. If you are searching for a low risk opportunity with reasonable returns and no management headaches, the world of Self-Storage Tenancies in Common might be ideal for you. Imagine a real estate investment opportunity that gives you: Insulation from the fickle nature of single-tenant properties. With hundreds (and even thousands) of tenants within a self-storage facility, it would take a […]
The phrase “1031 Exchange” is often thrown about as a catch-all for any property exchange that qualifies under section 1031 of the IRS tax code. However, there are several different types of 1031 exchanges, each of which brings with it a unique set of IRS rules and requirements. Which exchange type you choose depends on your circumstances and goals. Simultaneous Exchange As the name implies, a Simultaneous Exchange is an exchange where the closing of both the Relinquished Property and the Replacement Property occur on the same day. With this exchange type, the two closings usually occur back-to-back. IRS safe harbor regulations impact this type of exchange. Delayed Exchange When […]
A Delaware Statutory Trust (commonly referred to as a DST) is, as the name suggests, a legal entity created as a trust under Delaware state law. A DST is created for real estate investment purposes, and is especially useful in a 1031 exchange. Under a DST, investors each own a pro rata share of the DST itself. The DST in turn holds title to various real estate interests, and distributes any income received from the properties (either through rental income or the sale of the property) to the investors in proportion to their ownership share in the DST. The DST, via its signatory trustee, makes all decisions related to any […]
I’m proud to announce that I’ll be presenting at this weekend’s Realty411 industry event in sunny Ft. Lauderdale, FL. I’ll be discussing how TICs and DSTs can be beneficial in your next 1031 exchange, along with other important real estate investing topics. So if you’re a real estate investor already or just thinking about your first property, there will be something for you at this excellent networking event. Hope to see you in Ft. Lauderdale this Saturday, March 18, 2017!
Even before November’s surprise election results were known, real estate investors were keeping a wary eye on the future of Section 1031 of the IRS Code. The Obama administration had sought caps on transactions, and then-candidate Clinton had done the same. But it was the ultimate victor, Trump, who may have the ultimate influence on the future of this oft-used section of tax code. While no one can predict when or if section 1031 will be limited (or eliminated altogether), that isn’t stopping those involved in this sector of real estate investing from trying to read the tea leaves. This Forbes article summarizes some experts’ current thoughts.
Following the strict IRS rules governing 1031 exchanges is paramount to ensuring a successful exchange. One area where investors often trip up is in identifying potential replacement property(ies). To make sure you don’t make a misstep here and jeopardize your next exchange, we offer six helpful tips for identifying suitable replacement property in a 1031 exchange. 3 Property Rule – There are different rules that set forth how many possible replacement properties may be identified by an investor, but most follow this rule. It allows an investor to identify up to three replacement properties and eventually acquire, one, two or all three of them. 200% Rule – An investor can […]
One of the cardinal rules of any 1031 exchange is that the relinquished property and replacement property must be “like kind.” Unfortunately, when real estate is involved in the exchange, there is a fairly common issue that many investors unwittingly face – the involvement of personal property in the deal. This most commonly occurs when an asset like an apartment building (that includes household appliances such as refrigerators, washers or dryers) is exchanged for other real estate that may or may not include like-kind items of personal property. While the real estate itself (both the relinquished and replacement properties) is considered “like kind,” if one or the other does not […]
To successfully complete a 1031 exchange, you will need to avoid having actual or constructive receipt of the sale proceeds of the relinquished property during the pendency of the exchange. The way to do this is with use of a qualified intermediary. They will hold funds and title to avoid any violation of IRS rules. However, not just anyone can function as your qualified intermediary. While you might understandably turn to your own personal accountant or attorney to fulfill this role, doing so will invalidate the exchange. The IRS considers anyone who performs professional services for you within the previous 24 months as being “disqualified” to serve as the qualified […]