Seeking Help With 1031 Exchange Law
1031 exchanges are very popular because of the money saving techniques that are employed. There are some 1031 exchange law practices that need to be addressed before entering into a 1031 exchange with any person or company. These laws are laid out in great legal detail in the Department of Treasure Internal Revenue Source documents, but this is difficult to understand. For a better understanding of the 1031 exchange law, one must consult experts on the subject.
1031 exchange law allows a seller to defer the tax on the gains of the sale of a qualified property so that the money can be reinvested into a property of equal or greater value. Most of these exchanges are handled by qualified intermediaries and there are safe harbor rules for the intermediaries to follow. This safe harbor 1031 exchange law is what allows for people to feel safe in adopting the 1031 exchange as a method of purchasing property. By using an intermediary company that knows and follows the 1031 law, the Internal Revenue Service does not typically examine or challenge the exchange. This exchange does not have to be between two people but rather can be the selling of a property with the money going directly to the intermediary while a second property is found and purchased. It should be noted that the exchange law does not eliminate taxes on the properties, but rather defers the taxes until the property is sold again.
The 1031 exchange law does require the property to be of like-kind. This is to mean that cattle cannot be exchanged for apartment homes. There is a detailed explanation of the various rules dealing with the like-kind rules of the 1031 property exchange law. These laws illustrate the various properties that can and cannot be exchanged for another type. This is not to say that one property can not be exchanged for more than one property or vise-versa as this would not be a like-kind issue, but rather a value and numeric issue. This is not part of the 1031 exchange law like-kind information needed and is not an issue that needs to be addressed.
As with any legal matter, the 1031 exchange law should be addressed with a trained specialist. There may be matters that only a trained specialist is qualified to handle. These 1031 exchange law specialist would also be able to explain the reasons and specifics of any part of the 1031 exchange law. To be sure that one does comply with all of the 1031 exchange law, a specialist regarding the law and an intermediary company should be enlisted before any part of the exchange is attempted. Any failing in the process of the exchange could result in years worth of tax audits and fines. This can take a process that is meant to help a business save money and turn it into a very expensive procedure to get out of. With an intermediary and a specialist at one's side, the chances of any type of failing are all but eliminated.
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