1031 Tax Exchange Rules - A Need To Know Guide
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.
For foreigners the real property tax act that was enacted in 1980 requires the payment of at least a ten percent withholding of the sales price. Depending on which state you are in this requirement may be waived, so it is wise to check the laws of the state your in.
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: As a real estate investor, you must understand 1031 exchange rules to save significantly on your taxes. 1031 exchanges require you purchase your replacement property one hundred and eighty days after filing a transaction. For the best tax deferral, invest all of your money from the sale of your property into the new property that you buy. If you buy in a new state, you will need your broker to withhold a percentage of the sale for you tax bill. As you look for someone to assist you, only put your faith in a qualified intermediary. Search for 1031 tax exchange information online and select someone who can help.
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