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1031 Tax Deferred Exchanges

Is a Destin 1031 Exchange for You?

A 1031 tax deferred exchange may be the best tax advantage the Real Estate Investor has ever been given by the U.S. Government, and is becoming a widely used avenue to defer taxes in the Destin and South Walton real estate maket.

It allows real estate investors to sell an investment property and buy another property without paying any immediate capital gains taxes. The IRS 1031 tax deferred Internal Revenue Service code is not for use on principal residences or second homes, but only for investment properties.

In a  1031 tax deferred exchange, the Seller  must re-purchase a property of  equal to or greater value over the property they have sold.

Exchanges in Destin real estate and elsewhere are sometimes cumbersome and may involve up to 3 properties and only experienced real estate professionals, tax advisors well practiced in this specialized field and exchange company professionals who handle many of these transactions should be used to conduct exchanges. Tax accountants heavily experienced in this field will inform you that only about 25% of all attempted exchanges ever close escrow. The majority of 75% fail due to inexperience or the inability of the sellers to meet deadlines set for the exchange.

An exchangor or the seller of a property must submit a list to a qualified intermediary identifying the replacement property within 45 days of the closed sale of their investment property. Up to 3 properties may be named to acquire. The purchaser, who is then recognized legally as the exchangor must close the sale on the replacement property within 180 days following the sale of the reliniquished property or the due date of the seller's tax return, which ever occurs first.(If you were to sell the first property at the end of the year and did not close on replacement property prior to April 15th, in order to get the full 180 day period, you would need to file an extension for your taxes.  That way you would still have the full 180 day period in which to close on the replacement property.)  

To defer taxes the transactions must be structured to avoid receipt of any funds, including personal notes, cash, and mortgage relief.

A qualified intermediary must be used to handle the funds, which cannot be touched by the principals at any time or they risk being taxed on the entire profit they have made from their Destin real estate. To get more information on 1031 tax deferred exchanges just contact us.