Any real estate property owner or investor of real estate, should consider a 1031 exchange when he/she expects to acquire a replacement "like kind" property subsequent to the sale of his existing investment property. Anything otherwise would necessitate the payment of a capital gain tax, which can exceed 20-30%, depending on the federal and state tax rates of your given state. To make it easy to understand, when purchasing a replacement property (without the benefit of a 1031 exchange) your buying power is reduced to the point, that it only represents 70-80% of what it did previously (before the exchange and payment of taxes).
'Exchanging' a property, represents an IRS-recognized approach to the deferral of capital gain taxes. It's very important for you to understand the components involved and the actual intent underlying such a tax deferred transaction. It is within Internal Revenue Code Section 1031 that we can find the appropriate tax code necessary for a successful exchange. Go to
http://resources.robertsheldon.com/ for a few links to 1031 exchange companies, where you can learn about these exchanges. Please note that an
important ingredient of a successful exchange is a qualified exchange agent.
Owning a vacation home presents a number of situations that have tax implications. Whether it be capital gains from the sale, or reporting rental income, you need to understand the rules. This article covers four areas that you'll find interesting...
