Don’t Pay a Cent in Capital Gains Tax When You Sell an Investment Property.
Section 1031 Exchanges are an ideal tool for building wealth. ?For real estate investors who are not aware of a 1031 Exchange, it’s simply refers to Section 1031 of the IRS tax code allowing investors to sell investment property and use all of the proceeds to purchase new investment property while deferring taxes associated with the sale.? To qualify as an exchange, the Relinquished (sold property) and Replacement (purchased property) properties must be qualified “like-kind” properties and the transaction must be properly structured as an exchange.??? “Like-kind” Relinquished and Replacement Properties must be real property that has been, and will be held, for productive use in the investor’s business or for investment.
?There are many advantages to structuring your transaction as a 1031 Exchange.
·????? Defer taxes
·????? Improve cash flow
·????? Diversify or consolidate a real estate portfolio
·????? Switch property types
·????? Greater purchasing power
·????? Build and preserve wealth
·????? Expand into other real estate markets
·????? Greater appreciation potential
·????? Estate planning for heirs
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The exchange process is as follows:
1.??? The property owner (Exchanger) enters into a contract to sell their investment property to a buyer.
2.??? A Qualified Intermediary (QI) and the Exchanger enter into an agreement where the Exchanger assigns their rights in the sales contract to the QI.
3.??? At the closing of the property sale, the funds from the sale are wired directly to the QI and the deed is transferred to the buyer.
4.??? The Exchanger must identify possible Replacement Properties, in writing, within 45 days.
5.??? The Exchanger has a maximum of 180 days to acquire the Replacement Property.
6.??? The Exchanger purchases the Replacement Property.? The Qualified Intermediary wires the funds directly to the escrow agent with instructions to transfer the deed directly to the exchanger.
?If you want to learn more about how this can work for you, let’s start a conversation.? My contact information is below.
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Patrick Snyder
B.S., M.B.A., Realtor
(312) 898-7018
ERA Brokers Consolidated
Lic. S.0188030