Video Blog – 1031 Exchanges
Hi this is attorney Barry Miller, President of The Closing Agent and I want to talk to you today about 1031 exchanges. With the economy picking up 1031 exchanges are very popular. This is a way to defer your taxes. You have to remember that 1031 exchanges can only be used for investment properties. So first you cannot use this principal residence. Basically, what it does is that your profit from your transaction and lets you transfer that basis onto the new property. Therefore, you are deferring your taxes. Now, the basic rules for this are, you sell your property your money has to be held with an intermediary. We are a qualified intermediary. We hold your money and you have 45 days to identify a new piece of property. You can give us a list of 100 properties that you are looking at. You just have to pick one of those from that list you are looking at. You have 180 days from the closing of the investment property to close on the new one. That’s your typical 1031 and they are very popular. Investors should definitely use these if you are an Agent and if you have a seller that is selling an investment property you should suggest this to them. Now the other nice thing is that if you are selling one property, you can take the profits and invest them into 2, 3, 4, 5 properties. There is no limit. For example: If someone has a windfall and makes a million dollars off a piece of property they don’t have to reinvest it into one, they can buy 10 other investment properties. The other thing to remember is that it applies not only to real property but other business property. For example: Some people have boats. Where they might have someone manage it and they have someone that leases them out. You can sell that boat that’s for commercial purpose take the profit and buy real property. So, there is a lot of flexibility with 1031 exchanges. I would suggest with investors to check with their CPA, contact us if you have any questions and we can certainly help facilitate the 1031 exchanges as we are qualified intermediaries.