The Essential Laws of Resources Explained

Tips On Choosing a 1031 Exchange Facilitator

A 1031 exchange is the process whereby a business property seller is allowed by law to use all the profits earned from selling the old property to buy a new property.This is usually done so as to avoid paying the capital gain tax after selling an old property.The 1031 exchange is however restricted to properties that are the same or alike.The 1031 exchange properties can include businesses, holiday homes, residential and commercial real estates.

The sale of individual residing homes in exchange for others is prohibited by law.The 1031 exchange is also required by law to involve a third party member called the Qualified Intermediary.The qualified intermediary is responsible for holding all the sales earned on behalf of the investor until they can be reinvested in acquiring new property.However any other party that represents the investor is restricted by the internal revenue authority to act as a qualified intermediary in the 1031 exchange.

The 1031 exchange is facilitated by a set of rules and one important rule is that the income earned from the sale of a property must be used in acquiring another like-mind property.The second rule indicates that for the 1031 exchange to work, the new property must be equally or greatly valued than the old one.The other rule is that the equity of the property sold must be less or equal to the equity of the new property.

The debt of the old property must also be less or equal to the debt of the new property acquired.The other law that must be followed is that the new exchange property must be identified within forty five days after the old property has been sold. The new property should also be bought within a time line not exceeding more than one hundred and eighty days after the selling of the other property. To avoid the 1031 exchange to fail, the investor should adhere to the time given and make sure all the transactions meet the deadlines.

Selling and buying of holiday or vacation homes is also allowed by the law in the 1031 exchange.Privately owned residential homes are only allowed in the 1031 exchange if the owner rents it out and can only reside in it for fourteen days in a year.In case there is any cash remaining after the investor has successfully purchased a new business or property, then it is required by law that the remainder should be taxed.

There are many property management companies that deal in the 1031 exchange properties. An example of a company involved in the 1031 investment properties is the 1031 Gateway who are located in Coeur d’Alene, Idaho.

Learning The Secrets About Options

What Do You Know About Options