1031 Tax Exchange Rules: Qualifications And Property

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1031 Tax Exchange Rules: Qualifications And Property By Expert Author: David E. Williams
View Summary \| Submitted: 2008-07-03 \| Word Count: 368 words \| Views: 45 view(s)

A sound knowledge of 1031 exchange rules is extremely useful and important to real estate investing entrepreneurs. If the rules are studied and implemented in the right way it will save you lots of money in taxes! By simply doing some research you will increase profit and avoid problems associated with 1031 exchanges.

Deadlines are perhaps the most vital aspect to learning about 1031 exchange rules. You are obligated to purchase your replacement property only one hundred and eighty days following the transaction has been filed, or prior to the next filing cutoff. There is, however, a forty-five day identification time during which one can use one of three methods in order to identify which properties are under consideration for an exchange.

Your goal is to limit the total amount of deferred taxes. This can be accomplished by moving the entire amount into a new property investment. According to the tax code, "1031 exchange rules", it is not possible to take money generated from a sale, and use it for alternate, unrelated expenses. Therefore, you need to be particularly specific with your documentation. Keep a specific set of books dealing with the exchange, and write separate well documented checks for each part of the transaction.

If you live in a different state to where the property is sold, many states mandate that the closing agent or real estate agent must withhold a percentage of the sale price to make sure that the state receives any tax revenue due, because tracking down these non residents later can be very difficult.

The sale of property by a foreigner is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). This act requires that the purchaser of a property withhold ten percent of the sales price under certain circumstances. Waiver rules may vary by state, so familiarize yourself with what is allowed in your location.

Trust only an experienced and qualified intermediary when it comes to handling the filing and the paperwork, as everything must be done in accordance with 1031 exchange rules. You can easily get 1031 exchange information online and locate the nearest competent intermediaries.

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About the Author/Author Bio

If you are a real estate investor it is in your interest to do your homework on 1031 exchange rules. It could save you many thousands of dollars in taxes, and could help you avoid many of the pitfalls and problems associated with 1031 exchanges. By doing a little research you can maximize and optimize your tax deferrals.

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Article Tags: investing, 1031 real estate exchange, 1031 exchange rules, 1031 exchange informationbusiness, finance, government, law, real estate

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