1031 Exchange Rules & You

Posted by on Nov 25, 2014 in Tax Tips | Comments Off on 1031 Exchange Rules & You

Is a 1031 Exchange Right for You?

If you’re considering a 1031 exchange, it’s important to determine whether or not it is appropriate for your financial situation.

The first thing to think about is: are you really going to owe a lot of taxes? If there’s not a big tax liability, you may as well take your money from an outright sale of the asset. But if there is a significant tax liability, you’ll want to consider whether or not you have another piece of property or if you can find something suitable that would qualify for a 1031 exchange.

1031 Exchange Rules to Know

There are very specific rules for a 1031 exchange. You must have a qualified intermediary. Also, you cannot personally take possession of the money or you will owe taxes on it.

Rules must be followed to the letter. For example, you have to identify the property within 45 days and the sale must be closed within 180 days of the purchase. If this is violated by even one day, you will owe all of the taxes, which could be hundreds of thousands of dollars.

Partner with a 1031 Pro to Avoid Issues

If you’re ready to get started with a 1031 exchange, you need to make sure you are working with someone who understand the rules and will hold you accountable to them.

“In thirty years I’ve run across situations where people will go to a financial institution and miss it by one day,” says Jeff Baker, President of Baker Retirement and Wealth Management, P.C. “There are qualified intermediaries – companies that do nothing but this. We typically work between the client and the qualified intermediary to make sure that whenever it’s time to close the sale, the sale gets closed. The Internal Revenue Code has no flexibility. The clock starts running on the day of the sale, and if you miss it by one minute, you get to pay all those taxes.”

If you’re considering a 1031 exchange, ask the experts at Baker Retirement and Wealth Management, P.C. for help. For nearly thirty years, we have been serving the greater Evansville, Indiana area (Newburgh, Jasper, Henderson, Owensboro, Mt. Vernon, and beyond) with guidance regarding 1031 exchanges, tax laws, small business accounting, and more. Call Baker Retirement and Wealth Management today at 1-866-244-3517.

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