The Like Kind Exchanges under Section 1031 of the Internal Revenue Code are one of the few true "tax shelters" left today. Many people want to avoid current taxation of large gains on the sale of their investment or trade/business property. So how do you know if you are eligible for this exchange? And if you are, what are the requirements and ramifications? This free report from ABEK Real Estate will provide you with an understanding of this tax shelter option. However, please note that the requirements and benefits can change at any time, so it is always best to consult with your tax advisor before making any final decisions or plans.
What is a tax-deferred exchange? A tax deferred exchange is simply a method by which a seller trades one home or property for another without having to pay federal income taxes on the proceeds at that time. Normally, a seller has to pay taxes on the profit or gain from the sale of property; however, in this instance, it is actually deferred until some future date.
Advantages of an exchange. The main advantage for a tax deferred exchange is that there is no tax liability at the present time. It is much like an interest free loan from the IRS. One protection for taxpayers is that the tax liability is waived in the event of the taxpayer's death, ensuring that the heirs do not have to repay any tax liability that may have been incurred with this type of exchange.
Disadvantages of a tax-deferred exchange. Before you consider a tax deferred exchange, it is important that you consider the disadvantages as well. There will be a reduced basis in the replacement property as a result of the carryover of the basis in the property that was sold. This means that more gain will be realized when the property is sold than would have been in the case if the property had just been sold without considering the exchange. In addition, there are increased transactional costs for entering into an exchange including escrow fees, attorney fees, accounting fees, and the processor's fees. In addition, there are tax consequences if you use any of the net proceeds from the sale of the property for anything other than reinvestment property.
How do I take advantage of this tax deferred option? After you have considered all of the ramifications, you will need to use the services of an expert to make sure that you meet all of the requirements and that your exchange is legal and secure. You will want to research their background and knowledge of like kind exchanges. You also want to make sure that the professionals you use can answer all of your questions during the process of this type of real estate transaction.
So how do you know if a like-kind exchange is for you? Because there are so many matters to consider, ABEK Real Estate recommends that you talk with a professional. ABEK Real Estate can provide you with information OR you can talk with an entity that actually makes all of the arrangements for 1031's such as a title company. They can answer all of your questions. Their experience and expertise will ensure that all the necessary closing and exchange papers are legal and secure.
So call ABEK Real Estate today to schedule a time to meet. Call them today at (985) 646-2111 or toll-free at (877) 754-3355. Or send ABEK Real Estate an email at info@abek.com. You can also visit their Internet site and web page at www.abek.com.
