What to Know About 1031 Exchanges
A number of people love the idea of having an investment property but if time comes wherein you want to invest in another property by selling you’re the latter then you must consider 1031 exchanges. In 1031 exchanges you are given the chance to re-invest what you have earned from your investment property in accordance with the guidelines stipulated in the IRS code. Take note that everything that you gained from the sale must be invested into another property. It doesn’t matter if you invest the amount in several properties so long as the full amount gained is re-invested in other properties. Before the sale can be completed, there will be a company that will act as the one that will keep all the funds until a “like-property” is found.
The time it takes for you to decide on which properties to purchase using the profit of the investment property you are selling is 45 days. Now, to make sure that no one will take advantage of the situation certain precautionary measures are included. The 95% Exception rule is included in these safety measures or approach. This is called 95% rule since the seller of the investment property must get 95% of what the property they intend to purchase. The closing date of the identified properties is done once you have closed the investment property you intend to sell; the time frame is usually 6 months.
Almost all types of properties can qualify for a 1031 exchange except those used by people as their primary residential place. Most of the time 1031 exchange is perfect for those who are just starting out as investors in this kind of market. If you want to know more about these 1031 exchange guidelines along with the 1031 investment properties then the best thing to do is visit the IRS web page. There is also a list of intermediate companies that shall hold the funds of the investors along with accurate information about this exchange.
A number of people are into buy and sell of real estate properties without reconsidering the numerous advantage of using 1031 exchange that the IRS provide to them. The things mentioned earlier are just the basic things that you need to know about these exchanges.
People in the real estate business have different reasons when it comes to the manner by which they intend to use the gains in their properties, they can use it to purchase things or for future use. If you are to compare 1031 exchange and the usual buy and sell procedures of real estate properties, its primary advantage is its non-taxable aspect. This is the main reason why many people are into IRS exchange and why people think of it is the next big thing in the upcoming years in the real estate market.
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