1031 Exchange Information:
A 1031 Exchange is possibly one of the best money-saving investment tools that are currently available to Denver real estate owners today. Exchanging properties gives people who invest in real estate the ability to move from an investment to investment, whether it is Denver real estate, heavy equipment, business assets, artwork or aircraft, while keeping their equity intact.
If you have questions on this exchange and how it affects your individual tax structure, please call your accountant for complete verification.
Internal Revenue Service Code 1031 allows people who invest to defer paying both Federal and State capital gains taxes and depreciation recapture when they sell a investment in Denver real estate and buy another investment in Denver real estate of ³like kind² through an exchange transaction. Thus, people who invest can buy the Denver real estate they want and build their wealth faster by utilizing the exchange process.
The Internal Revenue Servicehas many steps that must be followed in order for an exchange to truly meet the requirements of Internal Revenue Service-pcode 1031.
A Time frame: From the time of closing on their relinquished Denver real estate, the person who invests has forty-five days to nominate possible replacement properties and a total of 180 days from closing to acquire the replacement Denver real estate.
Set up: The exchange must be set up prior to the closing of the person who invests¹ relinquished Denver real estate. The person who invests cannot have actual or constructive receipt of the funds. The person who invests or their agent should contact an Exchange Accommodator as soon as probable to begin setting up the exchange and also inform the Escrow company of the intention to complete a 1031 exchange.
Identity verification requirements: The person who invests must identify the replacement Denver real estate prior to the 45th day. The person who invests normally nominates three possible properties of any value. Then, acquires one of these three properties within 180 days. Typically, a common address (unambiguous description) will suffice. It is also a good identify to have a pending offer on a property. If the person who invests needs to prove more than three properties, then the combined values of all properties cannot exceed 200% of the relinquished Denver real estate's value.
Values: In order for an person who invests¹s exchange to be completely tax deferred, the value and equity of the replacement Denver real estate should be equivalent to or higher than that of the relinquished Denver real estate. people who invest can decrease mortgage levels by bringing cash into the replacement Denver real estate, but they cannot increase mortgage levels and take cash out of the transaction without a tax implication. If they take cash out or go down in value on their replacement, then they would pay taxes on a portion of the transaction.
Title: It is very important to review how title is held on the person who invests¹s relinquished and replacement properties and considentifyer possible financing requirements. The vesting needs to be consistent, in order to maintain the Internal Revenue Service³continuity of vesting² requirement.
To find a company to do this exchange for you --- please contact me and I will be happy to provide you with several companies for you to speak with and review the fees associated with the process.