Generally, no, you can not sell real property (“relinquished property”) and defer the payment of your depreciation recapture and capital gain income taxes by structuring a 1031 exchange by building on real property that you already own or by paying off the mortgage on the property.
What is a 1031 exchange mortgage?
A 1031 exchange is a tax-deferred exchange that allows you to defer capital gains taxes as long as you are purchasing another “like-kind” property. This exchange mechanism is used by some of the most successful real estate investors and can be beneficial in a variety of situations.
Can you get a loan on a 1031 exchange?
1031 Exchange Mortgage Lending North Coast Financial is a direct lender providing 1031 exchange loans in California for real estate investors. Reverse 1031 loans are also available for investors who want to acquire the replacement property prior to selling their existing real estate.
What kind of property qualifies for a 1031 exchange?
Property held for productive use in a trade or business or for investment qualifies for a 1031 Exchange. The tax code specifically excludes some property even if the property is used in trade or business or for investment. These excluded properties generally involve stocks, bonds, notes, securities and interests in partnerships.
How long does it take to get a 1031 exchange?
To qualify for a 1031 exchange, the investor will need to set up an account with a qualified intermediary. The replacement property must be identified (nominated) within 45 days of closing on the relinquished property. If using the three property rule, up to three properties can be identified.
What do you need to know about IRS Section 1031?
IRS Section 1031 has many moving parts that the user must understand before attempting its use. There are also tax implications and timeframes that may be problematic. Also, the rule stipulates the 1031 swap like-kind properties and limits the rule’s use with vacation properties. What is Section 1031?
Can a 1031 be extended if time runs out?
Sorry, but there isn’t one. Some investors go into a 1031 believing they can file for an extension if time runs out. Unfortunately, this is not a feature of the 1031. Due to the IRS same taxpayer rule, whatever entity relinquished the old property must be the same entity that acquires the replacement property.
