Post Tagged with: "cash in"

2 Critical Issues Underlying a Smooth 1031 Property Exchange

May 25, 2018 at 1:00 am Comments are Disabled

hand pressing on a calculatorIf you are looking for a credible way to cash in on your capital gains in real estate, you can start by browsing through the 1031 properties in Idaho from firms such as 1031ex.com.

See, instead of selling your old property, you can take advantage of a legal provision that lets you reinvest your profits. Under this kind of dealings, you get to sell one property and pump the entire sum realized from the sale into another property.

You’re on a clock

Understandably, real estate dealings are time intensive. There’s a myriad of paperwork to get through, not to mention the inevitable red tapes. However, that is a luxury you don’t quite have when engaging in a property exchange. Typical of the Internal Revenue Service, they can’t let you have all the fun.

So, they tend to put you on a short leash, well, for this kind of a deal. For starters, you have exactly 45 days, including holidays and weekends, to come up with at least three replacement properties. If you beat this deadline, you have another 135 days to seal the deal or start over.

Ideally, the latter period is stated as 180 days, but you might find that the initial 45 days are included thereon.

Don’t touch that cash

The IRS is quite categorical about what comprises a 1031 exchange, as well as what doesn’t. In this case, you can’t sell one building get possession of the cash then pays for another building. That amounts to a cash sale and is liable to taxable gains.

Hence, you need to brush up on the nuances of what flies in their book and what doesn’t. If you get possession of the sales proceeds before the entire process is complete, you’re stripped of the like-kind exchange privilege.

Immediately, the transaction becomes taxable. In some instance, you might incur penalties and interests for such a transgression. To avoid falling into a cesspool, have a credible expert handle the process on your behalf.

When handled properly, a 1031 property exchange hold considerable benefits for the people concerned. However, you need to consider a few crucial factors that ensure a smooth and successful process.