Land America 1031 Exchange Services

If you want to make the best out of IRS 1031 exchange service, you should make sure that you take services of a professional organization. LandAmerica 1031 exchange services were started in 1990. The main aim of the 1031 services is that it allows you to have tax deferred exchanges. LandAmerica has a number of offices all over the United States which are specially certified to provide you the best services in the IRS 1031 transactions.

All of us are aware that the Internal Revenue Service of the United States makes you pay a certain amount of money as tax every single time you sell or transfer a property. In case a taxpayer is able to follow all the guideline in section 1031, he is eligible to get tax deferment on the money

It is required that the funds acquired after the sale or transfer of your property are moved to purchase of a new property. You would not be required to pay any tax on the new property until you change the new property in such a manner that it fails to qualify for the said tax deferral.

If a person wants the tax benefits, the transaction involved in the sale of previous property and acquisition of new property must be done in such a manner that both the properties can be classified as "like kind". LandAmerica property exchange started at a time when IRS 1031 property exchanges were simplistic two party affairs.

Today they have become complicated and specialized exchanges of property. Regardless of this, LandAmerica 1031 exchange services are available to every in the United States, who is otherwise eligible to take advantage of such a scheme. LandAmerica provides you highly trained and experienced personnel who act as the Qualified Intermediary for your deal.

Here are a number of advantages in opting for the LandAmercia 1031 exchange services. To begin with, you would get a significant degree of financial leverage. As you are not required to pay a huge number of greenbacks, the total amount of disposable capital that is in your possession goes up that much high. You can apply this added capital to acquire more real estate. The net result is that there is an exponential increase in cash flow as well as appreciation. You end up with higher buying power.

Apart from this, there is a high degree of strategic flexibility. As a taxpayer, you get the freedom to employ various tactics in order to improve your investment flexibility. You can consolidate various properties and manage them easily. On the flip side, you can also diversify if you are interested in divestment in the future.

To put it in a nut shell, LandAmerica 1031 exchange services allow you to take control over your investments without having to bother about heavy taxes.

How To Do A 1031 Exchange

The 1031 Exchange provision of the IRS is a very potent provision that not only saves on unnecessary tax payments, but it also increases your real estate holdings. Therefore, you must know all about how to do a 1031 Exchange, if you are selling within the United States.

First, you have to identify a qualified intermediary. The qualified intermediary is also known as a facilitator or an accommodator. The IRS defines a qualified intermediary as a person who enters into a written agreement with you.

The agreement holds the facilitator liable in three ways. First, he will have to acquire and transfer your relinquished property. Relinquished property is the one you are giving up. Then he/she will have to acquire the replacement property, i.e. the property you intend to buy, finally transferring it in your name. It becomes needless to say here that the facilitator must be someone who is neutral

The facilitator takes the proceeds from your first sale for safe keeping in a specified bank. Then within the specified time period, he/she has to spend the money completely to purchase another like-kind property.

It is always advisable here that the value of the new property remains higher than that of the previous one. Otherwise, the amount remaining becomes liable to be paid as capital gains tax.

Appropriate wordings also are a must to facilitate the provisions of the 1031 Exchange. This means that your preference to perform the exchange as per the provisions of the code must be clearly stated. Any real estate agent or your intermediary can help you get this right. Once the written contract is in place, you can send its details to your intermediary as per his request.

Time is of essence if you want to benefit from the 1031 Exchange. Within 45 days of closing the sale on your relinquished property, i.e. the one you are giving up, you must identify at least 3 replacement alternatives. Your facilitator must be informed of these alternatives as soon as possible.

The purchase of the replacement property, i.e. the new property, must also be closed within 180 days of the closing of your old property. During this time, your rights to pledge, borrow or receive, or obtain otherwise any property or money held by the intermediary, would get expressly limited by the contract you entered with him.

Throughout the process you must remain in touch with all the parties involved. Although the deferred tax exchange is not a difficult thing to accomplish, all the steps, as per the American taxation laws must be strictly adhered to. Hence, the final words of caution; before finalizing your intermediary, conduct a market search.

All these guidelines are the answers to the basic question that we started of with, i.e. how to do a 1031 Exchange. Follow these guidelines to understand the rules.

1031 Exchange Laws In Simple Words

Capital gains tax deferment is available to tax payers in respect of exchange of like-kind US located real properties held for productive use or investment. The 1031 Exchange Laws provide this benefit. These are part of US internal revenue code (IRC) section 1031 of the income tax laws.

The basis of the above benefit lies in the recognition that no loss or gain occurs to a tax payer in case he/she exchanges one real property owned by him for productive use in business or trade or solely for investment purpose with another like property.

Exchanges of stocks, bonds, notes, securities, debt instruments, certificates of trust, and interests in partnership are not covered under section 1031.

The replacement property or the property to be received in exchange must be identified by the tax payer within 45 days of the date of sale of the property relinquished by him/her.

Further, the replacement property must be purchased by the tax payer within 180 days of a certain date. This date is the earlier one of the date of sale of the property relinquished by him/her and the due date of the tax return of the fiscal in which the tax payer sells the relinquished property.

In case gain occurs to a tax payer for non-like property exchanges covered under the subsections (a) of sections 1035, 1036, or 1037 of the income tax laws and in case the replacement property is a composite property, part of which is covered under the above provisions and in which respect no gain occurs and part of which is other property and involves cash profit too, then the profit to the tax payer shall be recognized in an amount not exceeding the cumulative sum of  the cash profit and the market value of such other property.

In case loss occurs to a tax payer for non-like property exchanges covered under the subsections (a) of sections 1035, 1036, or 1037 of the income tax laws and in case the replacement property is a composite property, part of which is covered under the above provisions and in which respect no gain or loss occurs and part of which is other property and involves cash too, then no loss to the tax payer shall be recognized.

Exchanges of different genders of livestock are not covered under section 1031.

In case a tax payer sells a property to a related person, the latter cannot resell it before 24 months have elapsed after acquiring it. Further, if the related person resells it for cash, potential abuse of the provisions of section 1031 may be triggered. In case a tax payer buys the replacement property from a related person, again potential abuse of the provisions is triggered. As such, in both cases, such transactions are not allowed.
In case a tax payer violates any provisions of the 1031 Exchange Laws, capital gains tax will be leviable.