A 1031 Exchange (Tax-Deferred Exchange) Is One Of The Most Powerful Tax Deferral Strategies Remaining Available For Taxpayers. Section 1031 of the Internal Revenue Code is the basis for tax-deferred exchanges. Taxpayers may not have to pay income taxes on the sale of property if they intend to reinvest the proceeds in similar or like-kind property.
The Advantage of a 1031 Exchange is the ability of a taxpayer to sell investment or business property and replace with like-kind Replacement Property without having to pay federal income taxes on the transaction.
Exchange Techniques. There is more than one way to structure a tax-deferred exchange under Section 1031 of the Internal Revenue Code. However, the 1991 “safe harbor” Regulations established procedures which include the use of an Intermediary, direct deeding, the use of qualified escrow accounts for temporary holding of “exchange funds” and other procedures which have the official approval of the IRS. Therefore, it is desirable to structure exchanges so that they can be in harmony with the 1991 Regulations. As a result, exchanges commonly employ the services of a facilitator known as a Qualified Intermediary.
We can help you on your exchange by analyzing your current situation and desires and help facilitate the 1031 transaction for you.
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