Internal Revenue Code Section 1031

The Section 1031 of the United States Internal Revenue (IRS) allows to defer the payment of taxes related to capital gains obtained in transactions of sale and exchange of real estate properties.

It consists of using the money - from the IRS tax - as part of the payment of the new property and transferring the obligation of your tax for later. This operation allows the investor to have more capital to invest in the new property by including money that he should use to pay taxes.

Here, experts from Riverside 1031 explain more about the Section 1031 of the United States Internal Revenue (IRS).

 
The first condition lies in the similarity of the properties to be exchanged: the one that the investor sells and the one that the investor acquires. That is, to be able to carry out a real estate exchange, the properties involved in the transaction must necessarily be similar and must have the same nature or character of use.

According to Riverside 1031 experts, the second condition is that the seller reinvests the total proceeds of the sale in another real estate of the same nature. If there is a loan, it should be equal to or greater than that of the property transferred in exchange, and that the seller should is not be in control of the proceeds of the sale until the exact moment of entering title to the property he acquires, as a result of the exchange. However, if you want to retain some money from the profit on the sale, there is the possibility of doing so as long as the taxes corresponding to the amount that you do not want to reinvest are paid.

Riverside 1031 experts indicate that the third condition is that the properties to be exchanged must be in the territory of the United States.

The exchange does not necessarily have to be done simultaneously. The Internal Revenue Service code 1031 allows the change of similar properties to be considered, even after the seller has transferred the property rights to the new owner, if the identification (45 days) and replacement (180 days) requirements are duly met.

Another advantage is that the seller can identify up to three properties to select from for the exchange, or he can identify any number of properties as long as their combined value does not exceed 200% of the value of the property being exchanged.

The exchange of real estate, using the code 1031 of the Internal Revenue Service, is undoubtedly a wonderful resource for increasing the inventory and improving the quality of the properties of all investors. It allows you to defer the payment to the IRS, use the money for an investment and return it over time without interest. It is the equivalent of a zero interest loan.

Riverside 1031 experts will help you defer gain, and create wealth. Contact them today to get started!

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