Only Real Property can be used in Section 1031 Like-Kind Exchange
Are you considering selling your real property to purchase another real property?
Would you like to defer your taxes or better yet make it tax free?
Here are six items to keep in mind when selling/buying real property and taking Section 1031:
- May use Section 1031 tax-deferred exchanges for real property only. If you keep using Section 1031 until you die, then your tax-deferred part could become tax-free.
- Real property for Section 1031 purposes includes real property as defined by the state or local law where the real property is located.
- Real property for Section 1031 purposes includes land, buildings, built-in permanent structures, and structural components.
- May qualify for Section 1031 exchange when 15 percent or less of the replacement property’s fair market value contains personal property.
- Can use cost segregation on real property to accelerate higher depreciation in the early years and still take the Section 1031 Like-Kind Exchange.
- The word “exchange” is a misnomer since property is not generally swapped with someone else directly. Instead, an intermediary is generally used to help sell your existing property and buy the replacement property.
If you have questions concerning Section 1031, please call Susan at 630.523.5762. For more great tips on becoming a highly profitable business owner, check out Highpoint Advisory Services.