1031 IRC - 1031 IRC Section - 1031 Exchange IRC

Using Internal Revenue Code, IRC, 1031 Can Grow Your Income Potential

Under IRC 1031, business owners and investors can reap substantial benefit by deferring the large tax bills that usually accompany the purchase of business related real estate, property or property assets, such as trucks or airplanes.

Basically, IRC 1031 allows you to make a purchase of a like-kind property without paying capital gains taxes on the sale. The 1031 code essentially turns a regular purchase and sales transaction into an “exchange” for property that will be used in a similar business fashion.

For example, you could “exchange” a large tract of unprofitable land and purchase a retail or office complex. Rather than pay the taxes on the price of the new property and assets, its business use allows you to defer the capital gains payments. This allows you to use that money to purchase above the value of the property you are exchanging, or use the tax savings to purchase additional property or business assets, provided they share similar use. The character and quality of the property being exchanged does not factor into the rules, instead, the property or asset must be of similar use, or like-kind.

Rules and Regulations Govern Transactions under IRC 1031

It is important to announce your intentions to pursue a real estate or property transaction under IRC 1031 from the outset. There are strict deadlines (45, 180 days) that must be met, and reams of paperwork that accompany the deal. In order to ensure you meet these deadlines and follow the letter of the law, a qualified intermediary should be secured. This person or agency will ensure the deal is conducted on time and in accordance with IRC 1031 law.

You can find a variety of qualified intermediaries on the internet or through local real estate agencies. When selecting one, make sure to verify their credentials by checking with a better business bureau or local business organization. Qualified intermediaries will charge fees for service and administration; however, these fees are relatively minimal compared to the savings you will receive,

Another advantage of purchasing under IRC 1031 is your capita gains taxes can be deferred continuously provided you continue to make like kind exchanges. This allows for steady and calculated business growth and the opportunity to see increasing income and assets over time.

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