What You Should Know About Options This Year

Some Things to be Aware of the 1031 Exchanges There are those investors who are quite wise to their tax benefits from the 1031 exchanges for several years. There are also people who are only new to the game and they actually wonder what all the fuss is about. They would hear realtors, investors, attorneys and others mention such but they are certainly not very clear on what the process actually includes. To make it easy, the 1031 exchange would allow the investor to swap a business or such investment asset for a different one. Under normal circumstance, the sale of the assets would incur tax liability on the capital gains. But, when you are able to meet the requirements that you can find in the section 1031 of such IRS tax code, you can then defer the capital gains tax. But, it is really important to note that the 1031 exchange is not a tax avoidance scheme. When you would sell the investment asset or the business and you won’t replace this with another property, then you will pay for the capital gains taxes. There are several nuances to the 1031 exchange and you have to get the assistance of the professional who has experienced in these transactions. Still you are also curious regarding the basics, here are the things that you must be aware of before you try the 1031 yourself.
Learning The Secrets About Taxes
You need to remember that this isn’t for personal use. Even if you are tempted to consider trading up your primary residence and avoiding the capital gains liability, the 1031 is only available for such property held for business or investment use.
Looking On The Bright Side of Exchanges
There are also some exceptions to the personal use prohibition. Just the same with a lot of things in the IRS code, the are exceptions to the rule as well. The personal residences don’t qualify, you can also successfully exchange the personal property like the interest in a piece of artwork or tenancy-in-common. Keep in mind that the exchanged property has to be like-kind. This is actually an area that would sometimes confuse the new investors. Such term like-kind doesn’t mean exactly the same but this would mean that the exchanged property must be similar in scope and use. The IRS rules may be liberal but there are several pitfalls for those who are not quite careful. You must also remember that the exchanges don’t actually happen concurrently. One really important benefit is that you can sell the current property and have around six months to close the acquisition of such like-kind replacement property. This is actually called a delayed exchange. You must get the help of such qualified intermediary when you like to complete the exchange.