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A Tax Deferral Opportunity - IRS Code Section 1031
In the Internal Revenue Service Code Section 1031, it states that a taxpayer may defer or reinvest all or a portion of the gains from an investment property into a "replacement" or a new investment property. This is why this strategy is often called "1031 Exchange." Though this may seem like a simple process, there are strict rules that must be followed. For instance, only investment properties, such as a business, may qualify for 1031 deferred status. Vacation homes and properties may qualify only if they are rented vacation properties and must pass a qualifying test each year to receive 1031 status.
How 1031 Exchange Can Affect Minnesota Property Owners
A 1031 exchange can affect Minnesota property owners in a number of ways. First and foremost, it can be a huge benefit by eliminating all or part of the taxes an owner has accrued on an investment property. If you bought a property for $80,000 ten years ago, and it is worth $300,000, capital gains tax will levy quite a fee. Using 1031 exchange, you can reinvest that fee into a new investment property, save money, and acquire a new investment.
The 1031 tax deferral strategy also lets you diversify your holdings. Perhaps you have waterfront property near the Twin Cities, but would like real estate in the mountains as this kind of real estate is increasing in value. You can do a 1031 exchange on a property anywhere in the United States-from the Northern Shore to Colorado-affording you the possibility of exploring other regions as well as perhaps setting up your retirement home. The IRS Code Section 1031 does allow you to inhabit your investment property as a home after a certain amount of years and with some restrictions.
If you are considering this tax deferral strategy, it is highly recommended that you consult an accountant or your tax preparer. Closing agents from title companies and real estate attorneys can help you through the process as well.
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Minnesota Real Estate News
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Fri, 03 Feb 2012 22:33:01 -0800
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Mon, 23 Jan 2012 09:21:00 -0800
LISLE, IL-- - Social media has become a vital component in the marketing strategy employed by today's real estate professionals. Many have incorporated vehicles such as Facebook and Twitter into their ...
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