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Demystifying 1031 Tax Deferred Exchanges...

Do you own investment property that has substantially appreciated in value since you bought it? Do you want to sell that property to acquire another property in some other location or another type of property? If so, you should consider a 1031 tax deferred exchange. By exchanging properties rather than selling, you can defer all or some of the tax on your gain.

1031 Tax Deferred ExchangeMany people believe that it is necessary to find another party with whom they can swap properties. Fortunately, this isn’t necessary since it could be very time-consuming and difficult, if not impossible. It is, however, critical to your exchange to retain an intermediary Starker.Com before closing on the property to coordinate the transaction with you, your tax advisor, and the closing agent, and to hold your funds until you are ready to acquire your replacement property.

Before participating in an exchange, you should speak with your tax advisor to determine if an exchange is right for you and to structure the transaction to your greatest advantage.

The closing of your relinquished property will trigger two important deadlines for your exchange. Within 45 days of the closing, you must identify the property(ies) you intend to acquire(“replacement property”). Your identification must be made in writing to your intermediary by specifying the street address or legal description of your replacement property.

The second deadline you must meet is the time within which you must acquire your replacement property. You have 180 days from the closing date of your relinquished property or the due date of your federal income tax return (with extensions), whichever is earlier.

It is imperative that your exchange is completely and accurately documented in the event you are audited. Documentation of your exchange begins with the contract for your relinquished property, which should contain language that the transaction is part of a 1031 tax deferred exchange. Your replacement property contract should contain similar language.

When selecting a intermediary, you should consider...

1. the security of your funds

2. the interest rate your funds will earn

3. whether the intermediary credits your account for all or a portion of the interest earned.

4. its professionalism and service, and

5. whether the intermediary will prepare accurate, complete documentation

A qualified intermediary Starker.Com with history and financial strength you can trust will explain in advance the exchange documents they will prepare, the services they will provide, the manner in which your funds will be invested, interest thereon, and the amount of their fees.

Feel free to contact me if I can be of any assistance!