Good News – Now, The Only Thing Certain Is Death

Published For The Corridor

Building Arts and Real Property

Ben Franklin once said “in this world nothing can be said to be certain, except death and taxes”.

You own a business. You pay your taxes. You purchase property. You maintain the property, you improve it. You pay your property taxes. You nurture your business, it grows. You keep paying your taxes. Now it is time to sell your property and get a bigger one. But what about the capital gains taxes?

You own investment property. You pay your property taxes. You maintain and improve the property for years, but are ready for a change or have another opportunity. You want to sell your investment property. But what about the capital gains taxes?

Today, when property planned and executed, the sale of an investment property does not have to generate a capital gains taxes liability. It is called a 1031 Exchange, for like-kind and like-class investment property sales and purchases. The simple explanation is that if a business or an individual sells an investment property, they can avoid paying capital gains taxes on the profit generated by the sale if they use the profit to purchase other investment property. This kind of exchange is replete with very specific rules: what kind of property qualifies, when must the new property be identified, when it must be purchased, how many properties may be sold and purchased at the same time, how much of the money realized from the sales must be used for the purchases.

While some of the rules have become more relaxed – for instance, the property purchased and sold no longer has to be identical - other rules, however, still remain strict – time periods for holding of the property, for identifying the replacement property, for finalizing the sale and purchase, must be adhered to with Swiss precision or the protection from the capital gains taxes imposition is lost.

To ensure that your property exchange goes smoothly and the tax saving s are truly realized, make sure you work with a knowledgeable team, consisting of an experienced realtor, attorney and a 1031 qualified intermediary. Feel free to contact our office for a free consultation and to find out when we will be presenting our next seminar on investment property and 1031 exchanges.

Jeremy Poland
Sobel Law, Syosset, NY

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