1031 Exchange Escaping The Certainty Of Taxes

1031 Exchange Escaping the​ Certainty of​ Taxes
‘In this world’,​ said the​ great Benjamin Franklin,​ ‘nothing is​ certain but death and taxes’ .​
While modern medicine continues to​ work on​ a​ cure for mortality,​ 1031 exchanges offer a​ valuable mechanism against the​ foibles of​ the​ taxman .​
Allowing the​ exchange of​ one property for another,​ this property market trend can help you​ hold on​ to​ money that might otherwise end up with the​ IRS .​
How do you​ know whether you​ are eligible to​ take advantage of​ this great property trend?
The first stipulation is​ that the​ two properties involved in​ the​ swap be in​ use for ‘trade or​ productive purposes’,​ that is​ that they are moneymaking concerns of​ some kind,​ such as​ a​ rental property or​ holiday home .​
The property intended for swapping must also reside in​ the​ US,​ though it​ can be located at​ any point within .​
1031 exchanges necessitate the​ involvement of​ what are known as​ Qualified Intermediaries,​ who deal with the​ paperwork involved in​ the​ switch,​ and assume a​ role akin to​ a​ property purchaser .​
The property to​ be exchanged is​ handed over to​ this intermediary,​ until the​ property owner locates a​ new property,​ at​ which point the​ switch can be made .​
This type of​ property exchange operates under strict guidelines and an​ exacting timetable .​
Once the​ original property is​ sold,​ a​ list of​ possible replacements must be supplied to​ the​ intermediary with forty-five days,​ while the​ exchange itself must be completed within one hundred and eighty .​
The title to​ both properties must remain intact throughout the​ entire process,​ so this is​ not the​ time to​ dissolve any business partnerships that might be involved .​
Any deviance from these strictures can threaten the​ entire exchange process .​
The properties to​ be exchanged must also be what is​ described as​ ‘like-kind’,​ meaning that they are roughly comparable .​
This does not mean that the​ two properties must echo one another entirely,​ it​ simply refers to​ the​ fact that the​ property relinquished and the​ one to​ be taken up must both be suitable for use in​ a​ similar business or​ investment related way .​
1031 exchanges are not for use on​ residential homes,​ and so,​ for many people,​ are of​ little value .​
But if​ you​ own a​ business property and would like to​ move premises without losing a​ sum of​ money to​ the​ taxman,​ then a​ 1031 exchange might just be the​ right choice for you.

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