Springfield Business Attorneys for Your 1031 Exchanges
If you had the chance, wouldn’t you prefer to put off paying taxes? They’re costly, frustrating, and just so, well, taxing! That’s why 1031 exchanges are so convenient when selling certain kinds of real estate. 1031 Exchanges can be a complex option; however, consulting with Springfield business attorneys will help you make sense of your options.
What is a 1031 Exchange?
When you sell business or investment real estate, you are required to pay capital gains tax on any appreciation in value at sale—unless you set up a 1031 exchange, that is. 1031 exchanges allow you to postpone paying those taxes as long as you purchase like-kind property with the proceeds. The idea is that because the seller is reinvesting the sale proceeds into another property, there hasn’t been an economic gain worth taxing. While the form (the actual property) of the investment has changed, the financial investment has remained the same. In effect, the seller is leveraging their potential tax liability into new real estate.
Understanding the Tax Benefits
With a 1031 exchange, you will not have to pay taxes on your investment until further down the line when you sell the replacement property. In postponing your tax liability, you enjoy the benefit of having more money to spend on another investment property. If the taxpayer never sells, then his or her beneficiaries will have virtually no capital gains tax because of the basis step-up rule. And finally, any gain from depreciation recapture is postponed until or possibly eliminated at your death.
If you’re planning to try a tax-deferred exchange, be sure not to transfer the property’s title, benefits, or burdens until you’ve set up the exchange. After the sale of your property, you have only 45 days to identify your replacement property (no extensions allowed) and 180 days to close on the replacement property. So if you wait the full 45 days to identify the new property, you’ll only have 135 days to close! Act fast because these time limits are strict.
For assistance with understanding or initiating your 1031 exchange contact us by calling 417-823-9898.
To learn more about 1031 exchanges visit our sister site: 1031NationalServices.com
LifeGen Law Group Can Provide Assistance for Your 1031 Exchanges
Essentially, the tax code has established a process whereby a taxpayer selling qualified real estate can defer/avoid the capital gains tax on that transaction if they reinvest in “like-kind” real estate within certain time frames.
When 1031 National Services is serving as the Qualified Intermediary for a taxpayer, 1031 National Services is NOT their legal counsel. However, many times clients contact LifeGen Law Group, and we engage them as legal counsel as they make their way through the 1031 rules and regulations. So, either as a taxpayer’s Qualified Intermediary through 1031 National Services or as legal counsel through LifeGen Law Group, our Springfield business attorneys are uniquely qualified to assist taxpayers in leveraging the equity in their property so they can sell when they want to without the government taxing the situation. Call today!