- Real Estate
1031 Real Estate Exchanges
Are you about to buy or sell real estate in Coronado? Before you enter into a real estate contract, find out more about 1031 exchanges to see if you can qualify for some of the tax benefits offered to utilize a 1031 exchange. Below are some of the frequently asked questions associated with tax-free exchanges. If you have further questions or would like us to introduce you to a 1031 specialist, please contact our office at 619-435-8722 or email us today
Who can qualify for a 1031 Exchange?
Anyone can qualify for a 1031 Exchange. Recent changes in the IRS code now make qualified sales and purchases of investment property and residential properties a potential tax-free event. Unlike the past rulings, you no longer have to "exchange property" as you did in the past. You simply have to follow the specific rules as outlined by the IRS and use a qualified intermediary.
What is a Qualified Intermediary?
A qualified intermediary is a company that specialized in 1031 exchanges. It can't be your real estate agent, your accountant, your lawyer or any other party serving as a member of the real estate transaction. The IRS says that if you touch the money, you pay the taxes, but if you use a qualified intermediary to transfer the money from any sold piece of property to into any purchased piece of property, you may qualify for a tax-free 1031 exchange.
Can a qualified intermediary offer legal or tax advice?
No. The IRS does not permit a qualified intermediary to provide other services. A qualified intermediary will work with your lawyer or accountant to assure that your transaction is tax-free.
Can I get money out of the sale and still have a tax-free transaction?
Yes, you can provide that it happens after your property is in escrow and before you close escrow on the new property. You need to consult with an actual 1031 exchange intermediary to get the exact details as timing is critical. If you need to contact an intermediary and would like us to provide the names of a few companies providing this service, please feel free to contact us.
Can I buy or sell multiple properties?
There is no restriction on the number of tax-free exchanges you can utilize in the purchase and sale of real estate.
How can I sell tax-free and retire with a mortgage-free home?
This strategy takes special planning but can be achieved. Make sure to contact an intermediary as soon as you know you want to implement this strategy to make sure that your situation will allow you to achieve this result when you retire.
How much does it cost?
Companies vary in regard to how they offer their services, however, a number of reputable firms guarantee their clients that if they can't create a strategy to eliminate any taxes consequences, they won't charge a fee.
Tax Myths in Selling Real Estate
For most people, the investment in your home is the largest investment you hold in your investment portfolio. In addition, if you have owned the same property in the state of California for the last 10 years or more, at least 50%-100% of the value in your home is equity. To maximize this equity, you need to look at all your options so that you can minimize the tax consequences in regard to your biggest investment. Let us know if after reading the information above you want to know more and speak with a qualified intermediary, please call our office today at 619-435-8722.
The Koop Group
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