1031 Exchange Basics
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Investors can expect to pay 15% to 20% of their capital gain in Federal Taxes, plus any state taxes that may apply, after selling an investment property. The tax liability can be substantial, depending on the transaction. A qualified exchange will allow investors that are looking for additional investment opportunities will have the ability to transfer assets without paying a considerable amount of the sales proceeds to the government. If the investor’s goal is to buy another investment property, then the exchanging is an investment worth thinking about.
Need a real estate agent to assist with a 1031 exchange in San Diego County?
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Replacement and relinquished property must be held for productive use in a trade or business or must be kept for investment. The property must also be like-kind; all real property is like-kind. The purchase price of the replacement property has to be equal to or greater than the net sales price of the relinquished property.
All the cash and/or other proceeds gained from the sale of the relinquished property must be used to buy a new replacement property.
An investor has 180 days to complete their exchange after the transfer of the relinquished property, or the due date of their tax return for the year in which they relinquish their property, which ever occurs first, unless the investor has filed an extension for their taxes. On the 45th day the replacement property must be identified in a manner consistent with the IRS regulations. Day 45 is identification period starts the day after the closing of the relinquished property. Closing is day zero and the following day is day one.
The 45 days are included in the 180 day timeline. You DO NOT have 45 days plus the 180 days.
Carlos Aguilar has over 30 years of real estate experience. If you need any assistance with a 1031 exchange in the San Diego, Southern California or any where in the United States, please call Carlos today. He would be happy to assist and answer any questions you have.