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Filtering by Tag: 1031

No returns - exchanges only

The Internal Revenue Service (IRS) allows an investor to sell investment real estate and potentially pay no taxes. Using a well-known tax law called Section 1031 of the Internal Revenue Code (IRC) an investor could defer capital gains on certain real estate investments.

Without a 1031 exchange tax liability could be as high as a blended rate of up to 35 percent in California. An investor who decides to cash-out from a sale could end up paying a large tax bill.

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The Reverse 1031 Exchange Explained

In a typical 1031 Exchange, a property is sold and then replacement property is acquired. On occasion however, it may be advantageous to do the opposite; acquire property first and then sell. This is called a Reverse Exchange. In theory, it sounds simple however acquiring replacement property first in a 1031 Exchange presents a few difficulties.

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Calculating Capital Gains Taxes in Investment Real Estate

I received the following information regarding the calculation of capital gains taxes from Asset Exchange Company.  I thought it was laid-out simply for most investors to understand.  Please keep in mind that the best way to avoid paying capital gains taxes is to conduct a 1031 exchange.  These types of exchanges have rigid rules governing timing, values, property type and other factors so be sure to pursue tax and legal advice as well as advice from your exchange accommodator.

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IRS to Examine 1031s

If you have used a Section 1031 tax-deferred exchange recently be sure to hold on to your documentation. The IRS is stepping-up their review of these types of transactions according to a Wall Street Journal report. The IRS has been urged by the Treasury in a recent report will be reviewing the 1031 rules and will be performing in-depth reviews of like-kind exchanges. Part of the reason is the the increase in tax-deferred exchanges doubling in 2004 to 338,500 from the 1998 figure. This represented almost $74B in deferred taxes.


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