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IRS Section 1031 Exchange- An Overview Of What It Means!

The IRS Section 1031 Exchange provides assesses an opportunity to postpone the payment of capital gains tax they owe in the case of an exchange of similar properties for business use. The owner of the property is not liable to capital gains tax on the sales of such a real estate if he/she can prove that he/she will re-invest the money from its sales proceeds in another identical property. The general idea behind this provision is that there is no monetary gain to business organizations or individuals when they sell a commercial property to buy similar one in its place.


Choose the experts that are a class apart 

The Welfont Group is a commercial brokerage corporate enterprise in America that concentrates its activities in assisting property investors and organizations that are tax-exempt as IRS provisions. The company endeavors to help such clients search for, scrutinize, finance, buy, handle and sell their real estate properties they use for commercial purposes. The officials of this business organization help their customers take advantage of various tax strategies that Internal Revenue Service declare and approve as legal in order to reach their full potential. Such schemes include 1031 Exchange along with IRS Section 170 Bargain Sale. To achieve this objective, the officials of the company work with analysts, property brokers, real estate mangers, evaluators, contractors and various prominent institutes. In the last ten years, the managerial personnel of this company have been a catalyst in accomplishing more $200 million in real estate sales.

Points to remember in Section 1031 Exchange sale

The experts of this prominent brokerage company explain that it is important for the parties to an IRS Section 1031 Exchange agreement to understand its basic characteristics, which are as follows:
  • Recognize
    The property owner intending to sell his/her current commercial real estate has a period of 45 days to recognize up to three similar properties where he wish to invest the sale proceeds. If the value of the properties he plans to buy is worth more than twice value of his/her previous real estate, he/she needs to invest up to 95% of the sales consideration in new assets.
     
  • Replace
    The seller has 180 days from the conclusion of the agreement for the sale of his/her previous property to purchase a similar real estate with money he receives on such an exchange.
     
  • Trade Up
    The market value of the property that the seller invest the money from his sales consideration in must be greater than worth of this previous real estate. Only under the fulfillment of this condition can he postpone the payment of the entire capital gains he/she owes the tax authorities. If this is not the case, he/she will be liable to pay taxes on difference between the sale process of the previous property and the value of the real estate he/she buys.
The professionals from Welfont Group go on to explain that IRS Section 1031 Exchange has one important advantage for property owners. This provision allows property owners to re-invest the capital gains they would be liable to pay to under the normal circumstances to the authorities in another similar real estate. 
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