Most real estate investors know that by means of a 1031 exchange they can trade one piece of real estate for another and delay payment of capital gains taxes. Many, however, are unfamiliar with the specific requirements of a 1031 exchange (also known as a “like-kind exchange” and “Starker exchange”) and of the advanced 1031 strategies that are available to them.
The real estate and tax professionals at Moskowitz, LLP understand the intricacies of both tax law and real estate and know how to combine these two areas of expertise for the ultimate benefit of the firm’s clients. We provide real estate investors throughout the United States and internationally with personalized, advanced 1031 exchange planning and the highest quality tax audit representation.
1031 Exchanges – The Basics
A 1031 exchange allows you to exchange real and personal property held as an investment, or for use in a trade or business, with a property of “like-kind” (of the same nature or character), and defer capital gains and recaptured depreciation taxes.
Property eligible for a 1031 exchange includes all kinds of improved and unimproved real estate. As of January 1, 2018, tangible and intangible personal property such as furnishings, computers, aircraft, livestock, artwork, musical instruments, copyrights, and franchise rights are no longer eligible. Although real property outside the U.S. generally does not qualify for 1031 exchange treatment, there are limited exceptions.
To obtain the tax benefit of a 1031 exchange, you must identify the replacement property within 45 days of the sale of the relinquished property and complete your new purchase within 180 days. A third-party “qualified intermediary” must be used to safeguard the exchange and to ensure that you are not deemed to have received the proceeds from the sale, either directly (“actual receipt”) or indirectly (“constructive receipt”).
Tax benefit and reporting
A properly managed 1031 exchange will offer tax deferral – not tax forgiveness. The deferred taxes will eventually need to be paid unless you continually invest in new properties throughout your lifetime and pass the property on to your children at your death.
A 1031 exchange must be reported on your tax return. Required reporting includes the adjusted tax basis and gains on the relinquished property, cash or other property received during the exchange (“boot”), dates in which the exchange took place, and the adjusted basis and gains on the property received.
1031 Exchange strategies and structures
The real estate and tax attorneys at Moskowitz, LLP don’t handle only straightforward 1031 exchanges. We can also assist you with advanced 1031 exchange strategies and techniques, including:
- Simultaneous, delayed, and reverse exchanges
- Improvement exchanges
- Partnership 1031 exchanges such as the Drop and Swap, Swap and Drop, or Split-Off
- Combining reverse and improvement 1031 exchanges
- Reverse and forward exchanges
We also provide expert representation with all types of tax audits, including audits in connection with 1031 exchanges.
California 1031 exchange lawyers
The experienced tax attorneys at Moskowitz, LLP can determine if you are eligible for 1031 treatment, what property qualifies, and help you facilitate a successful like-kind exchange. Contact our team today.