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1031 Tax Exchange


 

Triple Net Leases & 1031 Exchange

Guidelines for the 1031 exchange of certain properties is not well understood by most investors. This is the last great opportunities where real estate investors can build wealth and save taxes.

Consolidation, diversification, leveraging and relocation are all possible under 1031 without being penalized for either capital gains or recapture. For real or personal property to qualify, it must be a Like-Kind property with the same nature or quality of the same kind. 

One example of this would be a property owner that would prefer to own a lease property that does not require management. If the property however is not Like-Kind it is considered a Cash or mortgage Boot. One way to avoid Boot is to trade higher or bring cash to the closing to cover losses on the relinquished property. 

Once the property closes, there are deadlines that must be met to qualify for 1031 exchange. An investor has 45 days to encounter a new property and 180 days to complete the purchase.with no extensions allowed.

Replacement properties can only be transfer by a Qualified Intermediary after they have received written documentation describing the property.  The new property investment must be equal or more than the old property sales price.  Three rules constitute a replacement property including  95% rule, 200% rule, or the Three Property Rule.  These rules must be met or the property will be disallowed.

Investors can not take the sales proceeds with the 45 days during the exchange period. Only after the expiration date may the investor take the receipt of the sale. If during the 45 days the investor does not close on the property, 180 days must elapse before taking the proceeds.

There are a variety of ways to enter a 1031 tax exchange including Personal Property Exchange, Improvement Exchange, Simultaneous Exchange, Reverse Exchange and a Delayed Exchange.

In order to be properly vested according to 1031 Exchange rules, the person or entity that initiated the exchange must be the same entity that ends the exchange. Personal investors will absolutely not use their own bank account to hold sales proceeds else the exchange will be disqualified.

.Guidelines for 1031 Exchange At A Glance..

  • The value of the relinquished property minus any selling expense must be equal to  the value of the replacement property must be equal to or greater than
  • In order to acquire the replacement property, you must use all of the sale's net proceeds of the relinquished property
  • During the exchange process, a constructive receipt of sales proceeds is disallowed.
  • Meet all deadlines requirements for identifying and closing on the replacement property.

Billy Boys Tickets
Kissimmee, FL 34746
 Phone: 1-800-544-7646

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