Advantages of Tax Deferred 1031 Exchanges in Southern California


A 1031 exchange is a way to delay taxes when selling one property and buying another. It applies to business or investment real estate. When utilized properly, it can lead to dramatic savings. This article discusses the advantages of tax deferred 1031 exchanges in Southern California.

Qualified Property

You must own qualified real estate before considering a 1031 exchange. Qualified real estate are ones involved with a trade or for investment. It can include rental, land, residential, commercial, and industrial real estate. You must also buy similar real estate that is also qualified.

Advantages Of Tax Deferred 1031 Exchanges In Southern California

Usually, when you sell an investment property, capital gains taxes apply to profits from the sale. This applies regardless of what you plan to do with that money earned. Taxes can be levied by the federal and state government. Depending on how long you kept a piece of real estate and how much equity you have in it, the taxes levied can be quite significant. A 1031 exchange gives you a means to put the earnings from a property sale directly into purchasing a new like-kind property and delay capital gains taxes until you sell that additional real estate. Of course, another 1031 exchange could be performed on that future property to postpone taxes yet again.

Considering a 1031 Exchange

There are different elements to a 1031 exchange that you should be aware of BEFORE marketing aproperty. 1031 Exchanges may not be performed after a sale is complete. You must plan to perform an exchange when selling. Certain timelines must be observed to complete the exchange. This includes deadlines for selecting and purchasing replacement property. A qualified intermediary must also be used to facilitate the funds. If a deadline is missed, all applicable tax savings is forfeited. Speak with a knowledgeable 1031 exchange consultant for more on 1031 exchanges and to enjoy the full advantages of tax deferred 1031 exchanges in Southern California.