1031 Exchanges refer to Section 1031 of the Internal Revenue Code. Generally when you sell a property, you will be responsible to pay taxes on the capital gains you received from the sale. For example, capital gains on the sale of a property would be $250,000.00 if the property is sold for $500,000.00 and the property was originally purchased by the seller for $250,000.00. Capital gains are the difference between the basis (amount originally paid for the property by the seller) and the sales price. Factors such as depreciation, costs of repair and replacement during the course of ownership, may reduce the capital gains amount. While the specifics of these factors and others that could reduce capital gains should be discussed with a tax professional; we at Pun & Associates will gladly work with you to buy and sell investment properties within the requirements of a 1031 exchange.
If you are a real estate investor and you are looking to buy and sell investment property while reducing the amount of capital gains tax you will owe upon the sale of that property, you could perform what is called a Section 1031 exchange. As mentioned above, this exchange refers to Section 1031 of the U.S. Internal Revenue Code which allows an investor to use the entire proceeds of a sale of property to purchase another property to defer the payment of capital gains taxes. The new property must be identified within 45 days of closing on the sale of the old property and the purchase of the new property is to be completed within 180 days of the sale of the old property.
The office of Pun & Associates can help you in effectuating a Section 1031 exchange. We will enlist the services of a Section 1031 qualified intermediary to hold the proceeds of your sale and then disburse the proceeds when the purchase of the new property is completed.