The 1031 Exchange
March 17, 2011If you are thinking of selling your investment property, you might consider exchanging it for another property and defer paying taxes on any capital gained by taking advantage of Section 1031 of the Internal Revenue Code.
A 1031 exchange allows investors to make a tax-free trade for a similar or “like-kind” investment property. The term “like-kind” was expanded in 2004 from strictly meaning commercial property to include a larger range of property types. For example, in some cases, you could exchange a rental property or a piece of land for a new home for you and your family. You will be required to make that home your primary residence for at least 5 years, however, to qualify for the tax deferment.
There are timelines and regulations that have to be met in order to complete a successful 1031 exchange that is acceptable to the IRS. So it’s good to work with a REALTOR® who has experience with the process.
The tax deferred exchange has many benefits. It allows for more flexibility with your investments and gives you better control over the value of your portfolio. Be sure to consult with your tax advisor for more information.
For professional advice on all aspects of buying or selling real estate, please contact me at aross@miamirealestate.com or 305-960-2575, or come by the office at 355 Alhambra Circle, 9th Floor, in Coral Gables.
