1031 Tax

"1031 Tax Deferred Exchange" How Much Is Saved...

New postby Lucas » 26 Oct 2012, 14:55

"1031 tax deferred exchange" How much is saved in the typical exchange?

How much of the tax on House A is deferred toward the purchase of House B? When does the tax bill come due? After having owned it for five years and lived in it for at least three years?
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New postby Sharron » 26 Oct 2012, 14:55

Your mixed up. If you have lived in the house any 3 of the last 5 years any profits up to 250k (single) 500k (married)comes to you tax free.

If you didn't live in the house at all and it was a income rental property you can enter into a 1031 exchange. When you sell the property a third party hols the money (all of it) in escrow and you have period of time to find a new property to buy. When you buy it the exchange company pays the amount it was holding in escrow toward the purchase price. There by you save the taxes on the full amount of profit.
Just a thought right now the tax on long term capital gains is a max of 15% not all that bad. You might concider just paying the tax instead of deferring it with a 1031 exchange.
Once the dems get into office I assure you that the 15% will become 25-35%
and a 1031 may make more sense.
hope this helps
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Can you claim a 1031 tax deferred exchange on funds...

New postby Toshia » 26 Oct 2012, 14:55

Can you claim a 1031 tax deferred exchange on funds received for a perpetual easement for a cell tower?

Also can the funds be used to purchase a personal residence?
The easement covers approx. 2.75 acres of a 10 acre tract. The expiration of easement would be if the Tower ever went into a non use state. If 1031 is possible what can funds be invested in?
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New postby Cleora » 26 Oct 2012, 14:55

Section 1031(a) provides that no gain or loss is recognized on the exchange of property held for productive use in a trade or business or for investment (relinquished property) if the property is exchanged solely for property of like kind (replacement property) that is to be held either for productive use in a trade or business or for investment. Under § 1031(b), if a taxpayer also receives cash or property that is not like-kind property (boot) in an exchange that otherwise qualifies under § 1031(a), the taxpayer must recognize gain to the extent of the boot. Section 1031 does not apply to property that is used solely as a personal residence.

The amount received for granting an easement is subtracted from the basis of the property. If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received.

Any amount received that is more than the basis to be reduced is a taxable gain. The transaction is reported as a sale of property.

If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement.

If you grant an easement on your property (for example, a right-of-way over it) under condemnation or threat of condemnation, you are considered to have made a forced sale, even though you keep the legal title. Although you figure gain or loss on the easement in the same way as a sale of property, the gain or loss is treated as a gain or loss from a condemnation.
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When doing a 1031 tax free exchange, do I have to use all...

New postby Corine » 26 Oct 2012, 14:55

When doing a 1031 tax free exchange, do I have to use all of the money when exchanging, or can I use less?

Can I just pay tax on the portion that I want to keep out, and then defer the taxes on the remainder that I wish to re-invest?
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New postby Zula » 26 Oct 2012, 14:55

You can defer gain if you exchange qualifying property and also receive cash, but the cash you receive ("boot") will be taxable up to the extent of your gain.
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What is a 1031 tax deffered exchange, and what is...

New postby Filiberto » 26 Oct 2012, 14:55

What is a 1031 tax deffered exchange, and what is it's application in the real estate market?

Thank You for your time
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New postby Maddie » 26 Oct 2012, 14:55

It's a tax benefit that allows you to defer the tax liability until you sell the NEXT property.

Under normal conditions, it affects commercial property (income property). You sell yours and buy a like or similar property. ALLLLLLLLLLLL of the money from the sale HAS to go to an exchange company. You may not have it or you must pay taxes (state and federal) on the entire profit. Upon the sale of your property you have 45 days to identify you NEW property, and 180 days (this date starts when your 45 days starts) to close on the property.

You can do the Starker Exchange (10-31 exchange) indefinitely, each time you sell and buy. The lone caveat is, you may not have access to the money at any time during the exchange and it MUST be held by a company that does exchanges.

Pretty simple really. Most Realtors that deal in commercial (income) property are familiar with the process.

It's called a tax deferred exchange because you don't pay federal or (in some states) state tax on the profit until you SELL the property. You're not selling, your exchanging it for a better (different) property.
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I dont understand the 1031 tax exchange?

New postby Santos » 26 Oct 2012, 14:55

To do a 1031 you have to buy the next property and have the same loan amount on it as your old one. "like kind" or upgrade. so if i do a 1031, and my relinquished property had a 400,000 loan on it, I will always have to keep a 400,000 loan or higher on the next proerties. so my monthly payments will ALWAYS be the same, no matter how many times i do a 1031.

or is it.i have a 400,000 loan, in 5 years i pay it down to 300,000, and when im selling it its at 300,000 i have to have a 300,000 loan on the next property, then hold it and pay it down to 100,000 for example, then the next house i exchnage has to have a 100,000 loan amount? or is it based on the loan amount i took out at the time i bought it on my first one?

is it possible to build equity to where i have no loan on a propertyu with a 1031, or is a 1031 only for upgrading properties (keeping the same amount of loan on it, so my paymetns will be the same) but because its upgrading, it can produce more cashflow?
maybe a 1031 isnt for me? i have 5 properties. i want to buy and hold for 7-10 years then keep all the campital gains. and never buy anouther property again. so why would i need a 1031?
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New postby Hedy » 26 Oct 2012, 14:55

There are alternative options to a direct 1031 exchange where you will still have debt on the books, but you can reduce the risk of mortgage payments and increase your cash flow.

The primary transaction is called a 1031- TIC Exchange where you sell your property and exchange the equity and debt into a fractional ownership of a larger property. You do this through a 1031 TIC syndicator. The TIC syndicator buys high cash flow properties with long term leases. Essentially what they do is they collect rent from the tenants, use that to pay down the debt, and send the excess rent to you the investor. Cash flow yields vary, but 6.5-7.0% is about right.

Be careful about what syndicators you work with as they vary widely. Focus on the property first (a syndicator is only as good as his product). Look for buildings in stable, growing markets, with long term leases from high credit quality tenants.

I've done a fair amount of research on this topic and posted my sources below, but quick index of the sources:
-the 1031 tic exchange described above and the slightly more esoteric 1031 to a REIT: http://www.nestegginvesting.com
-how to evaluate a tic sponsor: http://www.1031-tic-exchange.net
-Performing a 1031-121 on your primary residence: http://www.1031-tic-exchange.info/
-1031-tic listings: http://www.1031research.com/
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If I build on my own lot, will I have to realize the...

New postby Zack » 26 Oct 2012, 14:55

If I build on my own lot, will I have to realize the deferred tax from depreciation from a 1031 Exchange?

I 1031 Exchanged into my properties. And I want to build townhouses on them and sell them. Do I have to realize the defrred tax from depreciation?
I want to tear down 2 triplexes on my lot and build some townhouses on top and then sell them. Do I have to realize the deferred tax from depreciation?
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New postby Leigh » 26 Oct 2012, 14:55

Are you talking about depreciation on bare land ? You can't depreciate bare land. If your accountant did, you might be in trouble. You can only depreciate improvements to the property. If you are talking about the 'deferred depreciation' rolled into the transaction from the exchange, you will have to recapture if you build a personal residence for yourself. If you build more investment property, then not.
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1031 Tax Deferred Exchange Question?

New postby Soo » 26 Oct 2012, 14:55

If I sell a property and buy another one using a 1031 tax deferred exchange, does it defer the both the capital gains and the recapture tax or just the capital gains. I depreciated the property out and will owe a lot of recapture tax unless the 1031 exchange will defer that to the new property along with the capital gains.
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New postby Rosann » 26 Oct 2012, 14:55

There will be no tax on any of the gain unless there was cash involved (e.g. you received cash as part of the transaction).
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Can anyone recommend a good Iranian CPA/Tax Attorney in...

New postby Kecia » 26 Oct 2012, 14:55

Can anyone recommend a good Iranian CPA/Tax Attorney in California, knowledgeable about 1031 Exchanges?

I have an Iranian client, badly in need of tax advice, uncomfortable with any but his own countrymen. As he is having to place trust in me in spite of this, I want to give him the best service possible by finding this person for him. He is a good man.
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New postby Britney » 26 Oct 2012, 14:55

The link below (if it works) is to a Martindale.com search for California lawyers who practice real estate law and speak Farsi.
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