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What is a 1031 Exchange Owners of business and investment Real Estate to sell their property and buy other like kind property without paying the Capital Gains Tax. These transactions are known as deferred exchanges, or 1031 exchanges, and allow the investor to continue his investment in another property without loosing investment equity to taxes. Trading or exchanging property has gone on for many years but there were no clear IRS rules on how those transactions would be taxed. That all changed in the summer of 1990 when the I.R.S. finally came out with the long awaited rules on Deferred Exchanges. Section 1.1031 of the Internal Revenue Code laid out in detail the procedure for turning a sale and purchase type transaction into an exchange.
These new rules allowed the owners of business and investment Real Estate
to buy and
The rules require that the property must be of “like kind” however the
like kind provision
The rules also require that the Exchanger use a safe harbor to hold the
proceeds
The only practical safe harbor for most Exchangers is a Qualified
Intermediary |
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