Answers To What Is A 1031 Exchange
While researching the purchase of a new home, one runs into information about a 1031 exchange and the tax deferral applications of the 1031 exchange. This can cause one to wonder, "what is a 1031 exchange and do I qualify?" There are some easy answers to the question of what is a 1031 exchange and these answers will answer the question of if one qualifies for the 1031 exchange. While this article will give many of the answers one is looking for, it is suggested that getting in touch with a section 1031 specialist is the best way to learn what is a 1031 exchange and to check to see if you qualify.
An IRS section 1031 exchange specialist would be able to provide all of the answers to the what is a 1031 exchange question. This specialist would be able to detail any properties that one might own that qualify for tax deferral exchanges and purchases. This specialist can be found at any of the real estate companies and working for 1031 specialist companies. Even some 1031 specialists work for themselves, although the portfolio is often smaller for the independent 1031 specialist than the portfolio of the company man.
When answering the question of what is a 1031 exchange, one does need to narrow down the answer. There are several types of 1031 exchanges. All of these exchanges entail selling one or more properties without having to pay immediate taxes and the purchasing of a replacement property of like kind and equal or greater value. These properties can be real estate or any other "useful" property such as machinery or livestock. Real estate property can only be exchanged for real estate and other properties can only be exchanged for that like kind. This like kind exchange can be fully explained by a 1031 exchange specialist.
Once the basic overview of what is a 1031 exchange is answered, the specifics can be explained. The normal 1031 exchange is the selling of one property and using the entire closing sum, purchasing a replacement property without posting a profit and deferring taxes to another date or indefinitely. There is also the reverse 1031 exchange where the replacement property is purchased before the relinquished property is relinquished. Then there are the IRC 1031 exchanges where the replacement property value is lower than the original property so that the loan on the property can be paid off before it is defaulted.
Another answer to the pending question of what is a 1031 exchange, is non-real estate trading. This is to mean that cattle, ships, planes, manufacturing equipment, even the personal automobile can be handled when answering what is a 1031 exchange. This exchange happens every day on the small scale when a vehicle is turned into a dealership as a trade. The entire sale of that car is used in the purchase of a new automobile. This is just called a trade in though, not too many people know that it comes from the section 1031 of the IRS law book.
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