Introduction to 1031 Exchange for Real Estate Investment Purposes in Jackson Hole
A 1031 Exchange (Tax-Deferred Exchange) Is one of the most powerful tax deferral strategies remaining available for taxpayers. Anyone involved with advising or counseling real estate investors should know about tax-deferred 1031 exchanges, including Realtors, lawyers, accountants, financial planners, tax advisors, escrow and closing agents, and lenders. Taxpayers should never have to pay income taxes on the sale of property if they intend to reinvest the proceeds in similar or like-kind property.
Read: What is a 1031 Exchange? or Read the Field Guide to 1031 Exchanges
Read : Requirements for Full Tax Deferral
The Advantage of a 1031 Exchange (tax deferred exchange) is the ability of a taxpayer to sell income, investment or business property and replace with like-kind replacement property without having to pay federal income taxes on the transaction. A sale of property and subsequent purchase of a replacement property doesn't work, there must be an Exchange. Section 1031 of the Internal Revenue Code is the basis for tax-deferred 1031 exchanges. The IRS issued "safe-harbor" Regulations in 1991 which established approved procedures for exchanges under Code Section 1031. Prior to the issuance of these Regulations, exchanges were subject to challenge under examination on a variety of issues. Since issuance of the 1991 Regulations, tax-deferred 1031 exchanges are easier, less expensive and safer than ever before.
Read: What qualifies a 1031 Exchange?
Read: What is like Property?
Exchange Techniques: There is more than one way to structure a tax-deferred 1031 exchange" under Section 1031 of the Internal Revenue Code. However, the 1991 Regulations established safe harbor procedures which include the use of an Intermediary, direct deeding, the use of qualified escrow accounts for temporary holding of "exchange funds" and other procedures which now have the official blessing of the IRS. Therefore, it is desirable to structure 1031 exchanges so that they can be in harmony with the 1991 Regulations. As a result, 1031 exchanges commonly employ the services of an Intermediary with direct deeding.
Read: What's the First Step in a 1031 Exchange?
Exchanges can also occur without the services of an Intermediary when parties to an exchange are willing to exchange deeds or if they are willing to enter into a 1031 Exchange Agreement with each other. However, two-party exchanges are rare since in the typical 1031 Exchange transaction, the seller of the replacement property is not the buyer of the taxpayer's exchange property.
If your looking for Tax Information, please don't hesitate to visit the IRS for Real Estate Tax Tips page which includes very important 1031 exchange information.
Click Here to for our 1031 Exchange FAQ >>
Here are some other VITAL resources that may help you to understand more on 1031 exchanges, and provide crutial information for the real estate investor.
The Asset Preservation Incoproration
The All Power of Exchange Topics
Tax Code / Legal References
1031 Exchange Information Network
