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 Does A 1031 Exchange Work

The IRS code 1031 has been around for quite some time now, but still most people misunderstand its provisions. So, how does a 1031 Exchange work?
Section 1031 of the IRC has only a few simple stipulations. If you follow these, you can not only save on your capital gains tax, but also exchange your old property for a bigger one.

The first stipulation states that only two like-kind properties can be exchanged with each other. And, this is where all the confusion generates. The term like-kind refers to the usage of your property. Therefore, if you have been using a factory, an apartment, an outhouse, or anything else, for your business, trade or investment, you can exchange it for another, which has been used in a similar fashion.

Mostly, people misunderstand this stipulation for the grade, character and quality of the property they want to exchange. This is, however, a totally wrong understanding.

But first, to be considered for deferred tax treatment, your property must qualify as such. As already partly discussed, earlier, any real estate, including land, must be used for productive purposes and/or investment purposes only. Personal and dealer property do not qualify for a deferred tax treatment.

By personal property, the IRC means those properties, which are used by the owners for their own residential purposes. For example, an apartment, a vacation house, an outhouse, etc. used for your own residence. However, if a residential property is rented out throughout its usage period, it will qualify under this section.

Another exception is the case of a residential property purchased mainly to be sold at a higher price in the future. This is classified as a property used for investment or speculative purposes. Section 1031 allows for tax savings on the sale of such properties also.

The IRS has appointed qualified intermediaries throughout the country who must be appointed by you to conduct a 1031 Exchange. Immediately after selling of your qualified property through a real estate agent, you must appoint your intermediary.

The intermediary will ask you to fill up a form and then keep the proceeds from your sale in a specified bank account. He will then help you to locate the right like-kind property. Two time limitations have also been specified by the IRS, in order to avail the benefits of this provision.

You must locate your new property within 45 days of closing your sale. And within 180 days of such closure, your new property must be in your legal possession. Another thing that you must keep in mind is that your new property must be of the same, or of a value higher than what you just sold.

The final step in the discussion of how does a 1031 Exchange work is to fill up the required IRS form and submitting it as soon as possible to the right authorities.

Important 1031 Exchange Rules

A tax payer needs to be aware of the various 1031 Exchange Rules framed by the IRS to enable him/her to claim deferment of capital gains tax on the sale of a property.

A 1031 tax deferred exchange is one in which a person sells his/her owned qualified property. Such property is known as the relinquished property. The tax payer in lieu of it then purchases qualified property, which is known as the replacement property. Both the relinquished and replacement properties must fit certain stipulated criteria.

These are given below.

Both the properties must be in the nature of real estate used for productive purposes in business or trade or solely held for investment purposes. However, second homes which may normally be used for investment purposes, but are also used as vacation stay homes are disqualified. A person can sell an investment property to buy a property used for business purpose or vice versa.

Properties owned for personal use or those available with dealers for sale purposes are disqualified.

The purchase of a replacement property from a related person can disqualify a tax payer from claiming 1031 tax deferment benefits. In case, the tax payer sells the relinquished property to a related person, the related person cannot sell it before 24 months have elapsed after acquiring it. In case, the related person resells the property acquired from the taxpayer for cash, issues of potential abuse of the 1031 provisos are triggered.

The relinquished property sale and the replacement property purchase need to be mandatorily implemented by the tax payer through an Exchange Agreement.

It is drawn up by a third party known as the Qualified Intermediary. The tax payer (known as the Exchanger) needs to sign the Agreement together with the Intermediary. By signing the Agreement, the Exchanger transfers the right of sale of the relinquished property and the right of purchase of the replacement property on his behalf to the Intermediary. The Intermediary effects the two transactions, and holds the net cash proceeds.

The Qualified Intermediary cannot be an Exchanger in any transaction or a seller or a buyer. Further, he/she cannot be a Realtor or Broker.

The Exchanger gets only 45 days from the date of sale of the relinquished property to identify potential replacement properties. A written notification needs to be received by the Intermediary within this deadline. In the notification, identification details of potential properties must be provided, which cannot be revoked after the deadline.

The purchase of the replacement property must be completed within a certain date. The date is the earlier of 180 days of the sale of the relinquished property or the due date of the taxpayer’s income tax return of the fiscal in which the relinquished property transaction takes place.

In case the tax payer violates any of the 1031 Exchange Rules, capital gains tax will be leviable on the tax payer as per IRS income tax laws.