The 1031 Tax Deferred Exchange: An Introduction

The 1031 Tax Deferred Exchange: An Introduction

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The 1031 Tax Deferred Exchange: An Introduction

Perhaps one of the most significant forces acting to minimize profit made in real estate, taxes are the mandatory expenses paid to local, state, and federal governments. Paying them is unavoidable if one is to remain in good legal standing and avoid any sort of penalty from the IRS.

 

Real estate professionals wanting to save as much money as they can on their taxes may do so by familiarizing themselves with certain tax language and programs designed to make sure adequate funds go back into infrastructure and guarantee “fair play” in economics.

 

One of these tax programs is the 1031 Exchange (also called a “like-kind exchange” or a “Starker”). Per Investopedia, “capital assets” are “significant pieces of property such as homes, cars, investment properties, stocks, bonds, and even collectibles or art. For businesses, a capital asset is a type of asset with a useful life longer than a year that is not intended for sale in the regular course of the business’s operation.” Investopedia uses the example of a computer being purchased by two different businesses, with one purchasing it simply to sell (making the item “inventory”) whereas the other company bought the item to use in an office (making it a “capital asset”).  “Capital gains” are the gains received from the sales of a capital asset, and taxes must be paid on the gains.

 

But what if one buying and selling properties could defer the taxes owed on the first capital gains acquisition to the next? How could that benefit someone in the world of real estate?

 

And could such a concept be used to reduce any tax burden for one buying a property?

Course Durations: 2 hrs, 7 mins 25 secs

Part A: Meet Your Instructor and Introduction

Part B: The Six Basic Requirements for the 1031 Exchange

1. Held for Investment

a. Examples of How States Determine What is Real Estate

b. Discussing What is Meant by the Hold Period

c. Like-Kind Property

2. The 45 Day Rule

3. The 180 Day Rule

4. Qualified Intermediary Requirements

5. Title Requirements

6. Reinvestment of Cash / Equal or Up Rule

Part C. Detail on the Qualified Intermediary

Part D. Ownership Issues and Concerns: 1. Corporations and Partnerships & LLCs

2. Trusts

3. Tenancies

4. Foreign Owners

5. Hold Period

Part E. Owner Financing

Part F. Cash Out of the Exchange/ Refinancing

Part G. Related Parties

Part H. For the Realtor: Finding Opportunities to USE the 1031 Exchange

Part I. How to Use a 1031 Exchange: 1. Consolidation Exchanges

2: Diversification Exchanges

Part J: Three Ways to Make the 1031 Tax Free Forever

Part K: Caveats on Primary Residence Conversion

1. A Real-Life Example of a Primary Residence Conversion

2. Primary Residence Conversion in Reverse!

3. Review of Primary Residence Conversion: Textbook Example

Final Review of the 1031 Exchange: Review of the Basics

Meet Our Course Teacher

Dave Foster
Dave Foster

The 1031 Tax Exchange

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