A Section 1031 exchange is a legal way to postpone or potentially eliminate taxes on the sale of a qualifying property. Our affiliate, Royal Abstract Intermediary LLC is ready, willing, and able to assist you in preparing and submitting your 1031.
Deferring or eliminating capital gains tax amounts to an interest-free loan from the Federal Government. As the value of your investment properties increases, you can repeatedly trade up, enriching your portfolio and continually defer taxes. Upon the death of the property owner, deferred tax on capital gains is forgiven and heirs receive a stepped-up basis equivalent to fair market value.
Types of exchanges:
- Delayed Exchange: This is the most common type of exchange. In this exchange, also referred to as a Deferred Exchange, the exchanger most often requires services from a Qualified Intermediary to hold the proceeds from the sale of a Relinquished Property and then acquire a Replacement Property.
- Reverse Exchange: This is a type of property exchange wherein the Replacement Property is purchased first, and then the Existing Property is sold on a later date. The acquired property must be held by a Qualified Intermediary pursuant to a qualified exchange accommodation arrangement.
- Two-Party Swaps: Otherwise known as a Simultaneous Exchange, this is the simplest exchange. It involves the trading of deeds by two property owners and works well if the properties are of comparable value. If debt is involved, however, it becomes more difficult.
- Improvement Exchange: This is also known as a Build to Suit Exchange. It allows taxpayers to add improvements to the Replacement Property using tax-deferred dollars.
This is just a brief overview of our services. For more explanation, please contact us to discuss your proposed transaction.