Forward 1031 exchanges offer all taxpayers the benefit of deferring capital gains taxes on the sale of property so long as you abide by the 1031 rules and regulations set out by the IRS. Drop us a line today to speak with our Bemidji 1031 exchange professionals and get started with your exchange – 877.373.1031.
Forward Like-Kind Exchange
The first thing we need to cover is what exactly a forward 1031 exchange is. Section 1031 of the Internal Revenue Code exists to incentivize investment in real estate and personal property. A 1031 exchange allows you to defer the gains accumulated during the sale of property and re-invest those proceeds into newer property, thus avoiding a big tax hit. A forward 1031 exchange is the most common type of exchange and refers to the order in which you relinquish and receive property. In a forward exchange you sell your old property first, and then identify and close on your new replacement property (the process is reversed with a reverse 1031 exchange).
There are strict deadlines you have to follow in order to complete an exchange. The video below explains those deadlines:
In order to complete a successful forward 1031 exchange, you first need to satisfy the 1031 holding requirement. That means that your old relinquished property and your new replacement property both need to be held for investment or business purposes. Property held for personal use does not qualify for 1031 treatment. Furthermore, your property needs to be like-kind as defined by the IRS. If you’re exchanging real estate for real estate, most property is considered like-kind. For example, a Bemidji hotel can be exchanged for a piece of farmland outside of town. If you’re exchanging personal property, the like-kind requirement is much more strict. Finally, it’s essential to go up in your value, equity, and debt when you exchange into your new property.
Bemidji 1031 Exchange Company
To be completely safe and ensure the best results for your exchange, it’s important to hire an intermediary or company that specializes in facilitating 1031 exchanges. A 1031 third party administrator can guide you through the forward exchange process, help prepare all the required documentation, and make sure you hit all the necessary benchmarks for your 1031 exchange. Contact us today to speak with a Bemidji qualified intermediary about your 1031 exchange options – 877.373.1031.