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Story Archives: Many common misconceptions
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Many common misconceptions
The IRS code 1031 commonly known as the 'tax free exchange' Section allows an individual real estate investor to delay paying Federal Taxes on the gain from the sale of his investment by purchasing another investment property. Many real estate investors are concerned about the tax consequences of a sale. However there are numerous misconceptions that surround this Section in the Tax Code. Let's look at some of the most common ones.
YOU HAVE TO IDENTIFY THE EXCHANGE PROPERTY AT THE TIME OF THE SALE – False; you have 45 days to identify the new property and 180 days to close. This gives the investor time to identify the new property, negotiate a contract and close the purchase.
YOU CAN CLOSE ON THE SALE AND THE NEW PURCHASE AT THE SAME TIME AND QUALIFY – False; the seller had control of the funds and therefore is disqualified from the IRS exchange rules. You need an exchange company to document the exchange and provide documentation of the exchange and instructions to qualify for the exchange.
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Bill Roark is a Commercial Associate Broker at Keller Williams Realty and may be contacted at bill_roark1@yahoo.com. |
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