IRS CODE 1031 Exchange Defined:

The best investment you don't control is an asset that rises in value and you sell after holding it for 12 months and a day. That way you pay much less to Uncle Sam -- 15% of your gains, instead of 35% (or so). Before you make an investment you need to think of the tax consequences. Of course, the really BEST deal is investment real estate. Buy something. Sell it. Buy something bigger. Do a 1031 exchange and you'll never pay taxes on the gains.

An IRC1031 exchange is a transaction involving the relinquishing of income or investment property and the receipt of like-kind income or investment property. When certain criteria are met, as set forth in Section 1031 of the Internal Revenue Code, taxes on any gain realized from the sale of the relinquished property are deferred.

The Steps:
1) Plan for the exchange, 2) Sell the relinquished property, 3) Acquire the replacement property.
Property Qualifications:
Relinquished and replacement property must be “held for productive use in a trade or business or held for investment.”
Exchange Timelines:
The investor must complete their exchange during a legally mandated exchange timeline. The exchange timeline begins at the close of the relinquished property and ends after 180 days or due date of the investors tax return for the year the relinquished property closed, whichever occurs first. A taxpayer can file for an extension on their tax return due date to extend their exchange timeline but in no instance can the timeline exceed 180 days. By the 45th day replacement property must be identified in writing.

note: I have read the entire code, and despite what your C.P.A. will tell you, THERE IS NO REQUIRED HOLDING PERIOD.

PLAN AHEAD. BUT, IF YOU HAVE ANY QUESTIONS JUST EMAIL ME.

IRS Changes May Affect Your Taxes:
Sale of Personal Residence Acquired in a Like-kind Exchange — Taxpayers who convert rental property to a principal residence should know that a tax law change may limit their ability to exclude gain on the sale of that residence if they obtained the property through a like-kind exchange. Generally, a taxpayer can exclude up to $250,000 of gain on the sale of a home, provided the individual has owned and used it as a principal residence for two out of the five years before the sale. The exclusion is $500,000 for a married couple if both meet the use test. The American Jobs Creation Act of 2004 does not allow any exclusion if the taxpayer sells the home within five years of acquiring the property through a like-kind exchange. The new law applies to sales after October 22, 2004.

THE IRS CODE 1031 EXCHANGE ALTERNATIVE: P.A.T.