1031 exchanges can be confusing for even the most experienced investors. There are a lot of rules and regulations when it comes to section 1031, and (as a result) a lot of questions. Here are some of the most frequently asked questions about Boston 1031 exchanges. If you have a question that isn’t answered here, don’t hesitate to call our Boston qualified intermediaries for any questions regarding your like-kind exchange – 877.373.1031.
What is a Like-Kind Exchange?
A like-kind exchange (also known as a 1031 exchange) is a provision set out in the Internal Revenue Code that allows investors to defer their capital gains taxes on the sale of property so long as they move those net proceeds into a like-kind investment.
What can I Exchange in a 1031?
1031 exchanges can be used for both real property and personal property. Most real estate can be exchanged for most other real estate because nearly all real estate is considered like-kind. When you start looking at items of personal property (gold, equipment, aircraft, etc.), you really have to be exchanging out of and into property that is incredibly similar.
Why Should I do a 1031 Exchange Instead of Selling my Property?
When you sell a piece of property – a building for example – you are going to recognize gains and pay taxes on those gains. This can be a hefty tax hit. A 1031 exchange allows you to defer those capital gains by re-investing your net proceeds into like-kind property that is bigger and better than your relinquished property. As a result, you get to avoid a big tax hit and keep your money working for you in a continued investment.
Why Should I Hire a Qualified Intermediary?
There are many benefits to hiring a qualified intermediary for your 1031 exchange. The biggest benefit is peace of mind. A skilled intermediary knows section 1031 inside and out. They can answer any questions you have, provide strategic recommendations, and help you ensure that you abide by all the 1031 exchange requirements.