A like-kind exchange or a 1031 exchange is a swap of one investment asset or business for another. If you do it according to the rules, you will not have to pay any tax for it. You can change the form of your business and you will not have to pay the tax or cash out. This action allows you to continue the growth of your tax-deferral. Also, what is amazing about the dst 1031 exchange is that you do not have a number of times you can do it, you can do it limitless. You have the opportunity to roll over the gain from one business to another real estate investment, and so on. And you can have profit on each one of the swaps on long term, because you are able to avoid paying taxes. You have to be careful and do this right, because the process does not have to be interpreted as selling the business’ location.
You can use the exchange for an investment not for personal spaces
This exchange was designed to serve the persons who want to change the location of their business, not of their personal properties. You cannot swap your house or other primary residences for another place, by using this method. In case you want to do it, then you should talk with a professional, because there are some exceptions of this rule.
You have free of choice when it comes to finding another property
The method requires investors to change their space with a similar one, but this is a broad term, and you have the possibility to find the space you want. For example, you can exchange a raw land for an apartment, or a strip of mall with a ranch. The option that suits you better is the one you should choose. This rule can be considered highly liberal.
You can delay the exchange
In theory, the exchange has to be made between two investors, but it is quite difficult to find another person who is looking for a space exactly as yours. Or you might not like the offers you receive. Because this is a common situation, you have the possibility to delay the exchange and ask the help of a third party. They will hold the money from the sale of your property, and will act as an intermediary.
You have to close the deal in six months
Once you have found the property you want, and you designate it as your exchange space, you have to make sure you close the deal in 180 days. You should start counting the days, from the moment when you sale your property. You have to name a replacement property in 45 days, but you should not have the misconception that these days are extra alongside with the 180 one. They run concurrently. This means, that from the 45 days of naming the property, you only have 135 days left. Make sure to respect the term if you want to have the replacement done properly.Read More