Highlands-Cashiers 1031 Tax Deferred Exchange
Almost all Section 1031 Exchange transactions involve unique elements peculiar to the individual exchange. I have been involved in many 1031 exchange transactions in the Highlands, NC real estate market over the past 28 years. I strongly recommend that you consult a competent qualified intermediary, attorney, or tax advisor to establish a course of action that best achieves your investment objectives and tax planning strategies while ensuring compliance with IRS rules.
In a normal real estate transaction, the seller is required to pay tax on any gain realized from the sale. A Section 1031 Exchange allows the tax on the gain to be deferred. Section 1031 of the Internal Revenue Code provides that no gain or loss will be recognized on the exchange of property held for productive use in a trade or business, or for investment.
A tax-deferred exchange allows a property owner to trade a relinquished property or properties for one or more replacement properties. Federal income taxes on the transaction are deferred. Remember, the important thing here is that 1031 exchanges are tax-deferred, not tax-free. When the replacement property is sold the gain becomes taxable. Postponing or potentially eliminating taxes on the sale of qualifying exchange properties is a huge tax benefit available to real estate investors in the Highlands real estate market. Deferring the tax gives you more money to invest in other investment property. It’s like receiving an interest free loan from the federal government! The gain from depreciation recapture is also postponed. Exchanging allows you to dispose of properties and reallocate your investment portfolio without a tax obligation.
Relinquished property and replacement property involved in an exchange must be held for productive use in a trade or business or for investment. Property acquired for immediate resale will not qualify. The taxpayer’s primary residence does not qualify but second homes often can and do qualify.
Section 1031 tax deferred exchanges offer substantial tax savings as well as wealth building opportunities for real estate investors. Highlands, NC is the perfect real estate environment for real estate investors involved in commercial property acquisition and offers a unique opportunity for second home owners to become involved in exchanging. Contact me for further information on Highlands or Cashiers properties that are suitable for exchange.
More detailed 1031 exchange information is available from Realty Exchange Corporation Useful 2014 exchange planning information and other pertinent subjects are covered on their Blog page. Realty Exchange Corporation is a leading firm in the exchange services field and they have been very helpful in several of my 1031 exchanges transactions.