There are many great Phoenix area homes for sale. Click here to perform a full home search, or if you're thinking of selling your home, click here for a Market Analysis so you know what buyers will pay for your home in today's market. You may also call me at (602) 413-8195 for a FREE home buying or selling consultation to answer any of your real estate questions.
What is a 1031 Exchange?
A 1031 Exchange is a section of the tax code that allows investors of investment properties to defer their taxes when they sell. This is the simplest form of it. Broadly stated, a 1031 exchange is a swap of one business or investment asset for another. Although most swaps are taxable, if you come within 1031, you’ll either have no tax or limited tax due at the time of the exchange.
So, when you sell your residential rental, commercial property or land, the IRS gives you the benefit of deferring your taxes if you use a 1031 Exchange.
As far as the transaction goes, it's a regular real estate transaction except prior to the close of Escrow, you have to arrange a 1031 exchange with a company like Dave's (IPX 1031). Once you set up a 1031 exchange agreement, the proceeds from the sale of the property are set up into an account instead of being given to the seller. This account is held for the investor by a qualified intermediary (which is required by regulations) until a replacement property is found.
A client has 180 days to purchase a new property from the close of Escrow on their property, and has 45 days from the sale of their former property.
However, primary homes, secondary homes, and vacation properties do not qualify for 1031 Exchanges. Fix-and-flip properties do not qualify either. However, you can use this exchange for land that you own or on residential rental properties. Anything held for investment or anything used for business can qualify for a 1031.
There is a lot more information that we could continue talking about, but we don't want to keep you all day. If you want to reach Dave for more information, you can call him at (602) 793-1558 or email him at david.tornell@ipx1031.com. We highly recommend Dave and his company to any of our clients here in Phoenix.
In the meantime, more information on 1031 Exchanges can be found here: http://www.1031.org/about1031/
As always, if you need any assistance buying or selling in Phoenix, please contact me and I would be glad to speak with you. If you need any more information on 1031 Exchanges, please feel free to call me.
