Deferring Taxes Through a 1031 Exchange

A 1031 Exchange is an ‘exchange’ of Real Estate that allows you to defer some or all of the capital gains taxes – sometimes indefinitely! Perhaps you own a home that you have been renting out for the past two years. Now you find an opportunity to sell that property at a nice profit. However, since this property does not qualify under the tax exempt primary residence rule, you will likely need to give fifteen percent of the capital gains to the IRS as a tax payment.

Instead consider purchasing some other type of Real Estate for investment purposes. It could be raw land, another home to rent out, a duplex, and under new IRS rules possibly even a vacation rental! When you purchase a qualified replacement property within the allotted time frame you may opt to defer some or all of the would-be capital gains taxes. After renting the property for approximately two years you may be entitled to move into the property yourself while continuing to sit on the taxes you deferred earlier!

Here is what the IRS says about 1031 Exchanges:

"No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment."

Like most tax regulations the rules can sometimes get a bit complicated. However the basic rules state that if you are selling a qualified piece of Real Estate and looking to purchase a “like kind” piece of property then you have 45 days to identify up to three pieces of property that would qualify under the 1031 tax deferment rules. You must then purchase one or more of these qualified properties within six months from the date of sale (NOT added onto the 45 day identification period). A “facilitator” will be involved at closing. A facilitator is a company like Asset Preservation Inc. which employs experts like Cris Anderson who can help navigate you through the 1031 process.

Sometimes 1031 transactions can be fairly straightforward. Other times there are numerous factors that come into play that make the process seem more complex. There are options for identifying more than three properties – but if you are not careful you could easily invalidate the entire 1031 transaction! Therefore it is extremely important that you have a skilled facilitator on your side.

Additional information about 1031’s and the properties that qualify as well as the broad based description of “like kind” properties is available, as well as contact information for Cris Anderson of Asset Preservation Inc. Just enter your email address below to receive this valuable information!

Now serving clients in Coeur d'Alene, Hayden, Dalton Gardens, Post Falls, Rathdrum, Fernan, Pinehurst, Kellog, Sandpoint, Lewiston, Plummer, Silver Valley and other surrounding areas.

We provide professional referral services to other areas of Idaho and Washington State, including Spokane, Washington. One call does it all!

Call Realtor Ron at (208) 666-6264

Why do I need a buyers' representation agreement?

Ever walked into an open house and thought about making an offer on the home? The agent showing the home will help you complete the paperwork. But this agent works for the seller, not the buyer. This means that he is required by law to represent the best interests of the seller, not you, the buyer. By choosing buyers' representation you can help ensure that your best interests are properly represented. And the law allows for "dual agency" where that agent can represent the buyer and the seller. But the only way to get that representation is through a written agreement. So don't wait until the last minute to sign the Buyers' Rep form! In most cases there is no cost to the buyer and there is no obligation to purchase property. It simply ensures that all of your Real Estate Rights are activated under the law!

Why do I need a sellers' representation agreement?

Did you know that 75% of homes that are not listed through a licensed brokerage house fail to sell? Plenty of other statistics are available, including higher selling prices and less time on market when a home is properly presented. But that first statistic should say it all. If you are selling a home or land in North Idaho you need to be represented by the best!

Call Realtor Ron at 208-666-6264 - Tomlinson North Idaho Sotheby's International Realty