The term “1031 Exchange” is defined under section 1031 of December 22, 2017, IRS code.
It refers to a legal tactic where a natural or legal person can reinvest the capital gain from the sale of a property, into another property that is of the same kind, without paying the corresponding capital gain taxes immediately.
In general, no gain or loss is recognized in the exchange of properties that are of the same kind, for example, A commercial property in Portland for another commercial property in Portland.
There is no limit to how many times or how often you can use the section 1031 exchange. The profit from a real estate investment can be reinvested in real estate over and over again. Capital gains taxes are deferred as long as they keep on the conditions stipulated in sec. 1031.
What is a Like-Kind Property
The term “Like-Kind” refers to two properties of the same nature, regardless of the quality
degree, and that they can be exchanged without incurring a tax liability.
Section 1031 Exchange defines that a property of the same kind can be exchanged for another one, always for investment purposes.
Properties for personal use do not enter on the Like-Kind classification.
At Better Off Home Buyers we have vast experience with everything related to the real estate market in Portland and across the country. We buy all kinds of properties and on many occasions, we have worked under the 1031 exchange modality.
We are constantly dealing with properties of all kinds and we know perfectly the different real estate business scenarios in our city of Portland.
Due to the ability that Better Off Home Buyers have to close real estate deals in a short time. Investors who contact us have no problem meeting the time frames required in section 1031 Exchange.
At Better Off home buyers, we often deal with the process of 1031 exchange in our home base in Portland, through Oregon, and in the country, that includes legal and tax liability procedures these transactions have.
45 Days To Identify – 180 Days To Close.
If you have a rental house, commercial property, or multifamily complex in Portland and you want to stop dealing with it. You do not necessarily have to sell it. Under section 1031 it can be exchanged for another like-kind property.
In order to do the exchange, it is important to comply with the rules on the IRS tax code under section 1031 regarding the period of time that capital gain can be reinvested.
Profits on a real estate sale can be charged on a 35%
After selling a commercial property, section 1031 allows a 45 days period to investors to identify another like-Kind property, which will be the replacement property.
Having an identity property means that all the actions required to purchase the replacement one have been taken.
The actual purchase of the replacement property must be completed within 180 days of the exchange.
Failure to comply with these terms of time makes the tax on capital gain automatic. So, investors must report capital gains as an income on their income tax return year period.
The great advantage of working with Better Off Home Buyers is that we have hundreds of properties in Portland Contact us. Throughout the state of Oregon, and other states in the country, so that whoever needs to make an exchange supported by section 1031, can identify and complete the required procedure working with us in a very short time.
If you have an income property, and you want to expand your real estate portfolio contact Better Off Home Buyers. Under 1031 Exchange you can exchange properties of the same kind. Take the legal benefits that law allows for deferring taxes. reinvest your capital gains plus the deferred taxes and keep your real estate business grow.
Within the 1031 exchange frame, properties may be exchanged, as follows:
Commercial Exchange Types, Section 1031 Exchange
The commercial property must be understood as any real property that generates an income. Either a single-family house, buildings, shopping centers, multi-family units, or farmland.
5 Common Types of Exchange 1031
- Delayed Exchange Situation in which you sell your property first. Then you find another property later and buy it with the funds of the sale. You have to complete this type of exchange within 180 days after you sell.
- Delayed Simultaneous/ Exchange The property you are getting rid of and the property that you are obtaining will be exchanged on the same day
- Reverse Exchange You buy a replacement property before you sell your property.
- Build-to-suit-exchange You can use part of the money that you receive to improve your new property. This can be done when you buy a property that is not as expensive as the property you sold.
- Simultaneous Build-to-suit-exchange reverse. The property desired by the client is parked in a Single Purpose Entity (SPE) until the client’s current property can be sold. During the parking period, the new property is improved by the SPE to the client’s wishes.
Just remember that under section 1031, you cannot proceed with the sale of a property, as long as a replacement property has not been identified and purchased within the terms provided by law.
Better Off Home Buyers has all the experience and resources to assist you with your needs to continue investing in the fascinating world of properties here in Portland or across the US.
If you need more information about section 1031 or simply you need to sell your property, or maybe you are a real estate investor, contact us in the City of Portland, the State of Oregon, and in all the states of the country, we have years of experience in buying and exchanging properties.
Tax code section 1031 Exchange is a tool that allows real estate investors to defer taxes on capital gains, and at the same time stimulates the growth of their portfolio in a significant way.
There are many advantages to swapping properties, for example, multiple rental properties can be exchanged for an apartment complex with an on-site manager, or for a property with a common lease program.