7 Tips For Section 1031 Property Exchange

Section 1031 of IRS has proven to be a boon for those investors who want to defer the taxes on capital gain.

To make sure that you seamlessly defer the taxes during 1031 property exchange, we present some essential tips.

Here we go…

Tip #1:

Convert vacation home into property held for investment, so that you can use it for 1031 property exchange in the future.

Tip #2:

You must purchase the replacement property with a value greater or equal to the relinquished property during 1031 exchange. This will allow you to defer all of the gains.

Tip #3:

Opt for delayed exchange if you are unable to find someone for an exchange. In this method, a middleman is used who buys replacement property for you by holding the cash after you sell your property.

Tip #4:

Use DST Investments as replacement properties, which will not only offer tax deferral but can also offer desirable returns.

Tip #5:

Review the tax structure for the states during 1031 exchange, if the relinquished property and replacement property are located in the different states.

Tip #6:

Opt for reverse exchange in which you purchase and close replacement property before selling the relinquished property. This process helps in handling the risks which occur in forward 1031 transaction.

Tip #7:

Do research while finding the “Qualified Intermediary” for the effective execution. You can go through the references, and check the experience and technical proficiency of QI. You can also take the support of companies like FAI exchange which can assist you in the process.

To know how FAI exchange can help you in 1031 exchangeprocess, check this link.