Working With 1031 Exchange Professionals

Written by admin on May 7th, 2011


If you’re contemplating a 1031 tax exchange for your next real estate transaction, you’re not alone. Every year, thousands of savvy investors use the toolkit available via a 1031 tax exchange to increase the value of their investments without losing crucial capital to taxes in the interim. 1031 exchange transactions represent a valuable tool for investors: this set of rules and mechanisms allows investors to delay the payment of capital gains taxes during the time that they are actively involved in the real estate marketplace.

1031 exchange transactions are not difficult – but they do require a decent degree of coordination and organization. This means that it is important that you work with a solid team of reliable experts through and through in order to ensure the success of your transaction.

One key person you’ll need on your team is a reliable tax professional. Why? Simple. A 1031 tax exchange is a procedure designed to take advantage of specially written language in the U.S. tax code. 1031 exchange transactions, then, have very specific tax consequences for your business both at the time of the exchange and later on down the road when you eventually engage in a standard taxable real estate transaction.

If you attempt to navigate these byways of the tax code on your own, you may come out just fine – but it’s highly likely that you’ll instead come out not exactly where you want. There are simply too many opportunities to slip up and make a poor decision or forget to follow through on a detail.

Working through a 1031 tax exchange is the sort of procedure for which one absolutely should have a qualified tax professional on hand: the assistance of an experienced individual looking at the tax laws with your best interests in mind is crucial for the success of your transaction and your finances.

There is also another individual who will be important to the smooth functioning of your 1031 tax exchange: your qualified intermediary. In a 1031 exchange, your qualified intermediary is the person or entity who holds the proceeds from the sale of your relinquished property in an insured bank account until they are needed for the purchase of your replacement property.

At that time, the qualified intermediary is responsible for transferring the funds to the seller of the replacement property. Without a qualified intermediary, your 1031 tax exchange cannot move forward: IRS rules for non-recognition of gain hinge on the availability and reliability of this person. In any 1031 tax exchange, then, it is imperative that you have a seasoned team of professionals on your side working in your best interest.

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