Insider Secret #32: Understand 1031 Exchanges to Save On Taxes
maria gudelis | April 2, 2008Another tip in a series of insider secret tips on how to make money from real estate by real estate expert Maria Gudelis. This series will contain investment secrets, techniques, and resources that will help you immediately put more money in your bank account
Wouldn’t it be great to stop paying ANY taxes on your real estate profits? You can by doing what is called a “1031″ tax exchange. This allows you to sell a property and acquire another one without paying any capital gains tax or ‘deferring’ the tax until you no longer exchange. If you plan for the future right, you will never pay those taxes!
So why is it called a 1031 exchange? That is the Section Number in the Internal Revenue Code. The requirements of Section 1031 must be completely complied with if the tax-free status of the transaction is to be kept. I strongly advise you to have your accountant and/or attorney review any real estate transaction.
There are some basic guidelines you need to know in planning a 1031 exchange:
 You need to identify a “accommodator / intermediary” that will help facilitate your 1031 exchange
 When you sell your property, you are then have 45 days to identify the property or properties you will exchange into and then you MUST close 180 days after that period (so basically 45 days + 180 days the new property /properties must be closed)
 The total value of the property you are exchanging into must be of Equal or Greater Value as the property you sold.
 You should use all Exchange Proceeds.
 The property you are exchanging into must have Equal or Greater Debt (same or greater loans) as the property you sold.
