Outer Banks Real Estate

1031 Tax Free Exchange

The 1031 tax-deferred exchange is a process that allow a taxpayer to use capital gains (profits) earned from one real estate transaction for the purchase of a “like kind” investment without penalty.  Of course, certain conditions apply:

  • Properties must of “like kind” meaning the old property must have been an investment or commercial property if he/she is looking to purchase an investment or commercial property.
  • Total capital gains earned from transaction must be reinvested into the new property or is subject to taxation.
  • New investment property must be identified by the seller within 45 days of the closing of old property
  • Seller must take possession of the new property with 180 days of the closing on the old property
  • All transactions must go through a Qualified Intermediary.  Always consult with your attorney, CPA or other financial professional for qualified intermediaries in your area and specifics on your transaction. Again, your REALTOR® can help you contact the correct people.

Posted on September 3, 2015 at 9:23 pm by Michael Davenport

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