3 Things You Need to Know About 1031 Exchange

If you want to sell your investment property for buying another property, you will need an arrangement that allows you to exchange the property while reducing the tax. This process is possible under Section 1031 of the United States Internal Revenue Code. As a law-abiding taxpayer, you can avoid paying capital gains taxes if you work with a service provider of replacement property in Utah. If you are new to the 1031 exchange, check out some points we share below.


Not for personal use

There might be several investment policies offered by the IRS tax code, but not the 1031 exchange. This program is for investment property only, and you cannot trade your real estate, stock in trade, bonds, Certificates of trust or beneficial interests, and other securities or pieces of evidence of indebtedness. The process of replacement property in Utah excludes these items because most of these cases are obsolete after the 1984 amendment.


Investment property only

If you want to trade your property under the 1031 exchange, look for assets that could qualify for the exchange. Farmlands, rental commercial or residential properties, and mitigation credits are a few examples of properties the policy allows you to include in the trade. These items are collectively known as like-kind property because they have the same nature, character, or class. For instance, you can exchange an apartment building for a retail store. Some other examples of like-kind properties include industrial buildings, vacant lands, shopping centers, hotels, and ski resorts.


45-day rule

Right after the sale of the relinquished property, you have 45 days to identify potential replacement property. During this allotted period, you will have ten days to acquire more identified properties. The negotiator should receive the money once the transaction took place. You must designate the replacement property in a written statement to the negotiator. Sometimes the process could be too complex for taxpayers, which can result in a misunderstanding between traders. That is why hiring a qualified intermediary is necessary for the trade. Such financial experts offer reliable service for replacement property in Utah to their clients.


When you are determined to sell or buy the relinquished property, consult a trusted 1031. The professional can make available 1031 replacement properties structured as unregistered securities.


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