1031 MN

What are Some of the Mandatory Time Frames And Rules For 1031 Exchange?

Those who are experienced real estate investors might already know all of the ins and outs of the 1031 rules. Those who are just getting started in investments or who are simply looking into their options may not yet understand all of the 1031 requirements that are needed to be fulfilled in order to gain the tax benefits that are sought after.

The first thing you want to do is to make sure that you are very familiar with all of the ins and outs of the 1031 requirements. By missing just one little fact, step, or piece of information, you could literally miss out on thousands of dollars. Wouldn’t you much rather that money be invested into another piece of real estate than given to the IRS right now? Of course, if you are not looking to reinvest in real estate, the requirements for the 1031 will not matter to you. If you want to build your wealth though, make sure that you are closely watching for the requirements.

To start, you have to have an investment property that you are selling. This is not a place where you are living, although you could have tenants in the property. Once the investment property sells, you have to name another property that you are purchasing in place of that one. The new property and the property you are selling have to be of “like kind”. This means that the value of the new investment property must be at least the same value of the property you are selling, if not more. In some cases, the new purchase can be of several different properties as long as they add up to be of “like kind” when it is all said and done.

You have exactly forty five days from the date that you sell your property to name the property or properties that you are using as the replacement. The 1031 rules clearly state that the forty five days is not negotiable, you cannot get an extension. There are no exceptions to this rule. You either comply with the rules or miss out on the tax benefits. One thing that seems to mess a lot of people up is that the forty five days does include weekends. It even includes holidays such as Christmas and Easter. So, make sure that you are counting down your forty five days exactly. You do not want to miss the deadline by even one day because you would not be able to take part in the 1031 exchange and you would miss out on the tax benefits.

Now, while you have forty five days to name the property that you want to use as the replacement, or the trade, you have only one hundred and eighty days from the date of the first sale to gain the replacement property or properties in your name. You want to make sure that you are taking your good old time with this. Those one hundred and eighty days can move pretty quick and a lot of things with the sale can go wrong or cause a delay. Also, if your IRS tax bill has a due date that comes before the one hundred and eighty days, you will have to go by that due date, which means you do not have as much time as you would have thought at first.

Make sure that you are not waiting until the very last minute for all of your transactions. Also make sure that you are looking over all of the 1031 rules and regulations. If you do not know what you are in for, you may miss some of the 1031 requirements and miss out on that tax delay. This could be the difference of getting another investment property or not getting one. It may seem like the 1031 requirements can go on and on forever, but once you really dive in there and start reading through everything; you will find that the 1031 rules are pretty straightforward.

As long as you are taking the time to read through all of the 1031 requirements, you will be just fine. If you find that the process begins to sound a little confusing for you, all you have to do is talk with your real estate attorney and he or she should be able to understand everything about the 1031 rules and requirements.

If you do not yet have a real estate attorney on retainer, you may want to consider getting one, even though you do not have to have one in order to take advantage of the 1031 exchange. You just never know when there will be additional tax breaks or deferments that you can take advantage of. The more you know and the more loopholes you take advantage of, the bigger and better your overall wealth will become.