Our 1031 Exchange Specialists Have Decades Of Experience Helping Taxpayers Conduct Tax-Deferred Delayed Exchanges (Straightforward Exchange).
Section 1031 of the Internal Revenue Code allows taxpayers to defer capital gains tax on like-kind exchanges of qualifying real property. In this scenario, taxpayers must work with 1031 exchange specialists (sometimes referred to as a 1031 qualified accommodator, 1031 facilitator or 1031 exchange agent) to execute a delayed exchange.
What Are Delayed Exchanges?
A delayed exchange (otherwise known as a straightforward exchange) is a 1031 exchange that involves conducting two separate transactions. First, the exchanged property is sold, and then the replacement property is acquired at a later date. While this type of exchange is common, there are several pitfalls that can trigger gain recognition when taxpayers aren’t careful.
The Delayed Exchange Process: An Overview
To ensure that they are able to achieve tax deferral under Section 1031, it is important that taxpayers are aware of the major steps involved in the delayed exchange process. Even if you hire 1031 exchange specialists to handle the process for you, you will still need to remain involved and make informed decisions at various stages along the way, as well as have your CPA or tax professional file proper reporting forms with the IRS and calculate your tax basis. With this in mind, the major steps in the delayed exchange process are:
- Sale of the property to be exchanged with the proceeds managed by a qualified intermediary
- Identification of one or more qualifying like-kind replacement property(ies)
- Acquisition of the replacement property
- Calculation of the taxpayer’s basis in the replacement property
- Filing of Form 8824 (to report the like-kind exchange to the IRS)
Throughout the process, taxpayers seeking to defer capital gains tax liability through a like-kind exchange must meet several deadlines and requirements. For example, the replacement property must be formally identified within 45 days of the disposition of the exchanged property, and it must be acquired within 180 days in most cases. Additionally, the replacement property (which may be one or more separate assets) must generally not exceed 200 percent of the fair market value of the exchanged property. However, exceptions apply, and being able to leverage these exceptions when necessary can be crucial for securing the tax savings available under Section 1031.
Why It’s Important To Work With 1031 Exchange Specialists
Given the complexities involved in the delayed exchange process, it is strongly in the taxpayers’ best interests to work with a team of experienced 1031 exchange specialists. Mistakes and delays at any stage of the process can prevent taxpayers from deferring their capital gains tax liability. This can prove extremely costly, and it is an unnecessary consequence that 1031 exchange specialists can help you avoid.
Speak With A Specialist At 1031 National Services
At 1031 National Services, our 1031 exchange specialists have more than 30 years of combined experience helping taxpayers successfully execute delayed exchanges. If you need to know more about the steps involved in executing a delayed exchange, we invite you to get in touch. To speak with one of our specialists in confidence, please call or get in touch with us online today.