Las Vegas 1031 Tax Deferred Exchange
The 1031 Exchange for Las Vegas property
is derived from Section 1031 of the IRS code which makes it
possible for investors to defer capital gain tax liabilities
when selling and buying a property of equal or greater value.
It is also referred to as a "rollover" and it is advisable to
use an intermediary to sell your property and buy the replacement.
This transaction device is authorized by section 1031 of the
IRS code and allows investors a reliable and time-tested method
for the protection of their Las Vegas real estate assets. In
actuality, an investor could continue to avoid any capital gain
taxes on Las Vegas investment properties with this code in tact.
A proper, IRS approved, 1031 Exchange allows the investor
to reinvest 100% of his equity from the sale of a property into
the purchase of a new replacement Las Vegas home or other Las
Vegas real estate without recognizing any gain, thus, deferring
any federal and most state capital gain taxes.
The Section 1031 exchange is really a sale and then a subsequent
reinvestment. The deferred exchange is the most popular form
of exchange. It involves four parties:
- You as the owner (actually, seller) of
the Las Vegas property being relinquished.
- The buyer for your property.
- The seller of the Las Vegas property you
want to acquire.
- A qualified intermediary.
The qualified intermediary is an individual
or entity with whom you have not had a business relationship
of any sort within the last two years. Therefore, an accountant,
lawyer, or real estate sales professional will not qualify as
an intermediary.
A qualified intermediary makes the exchange work ---no exceptions!
The intermediary handles the money and holds the sales proceeds
from your Las Vegas property in interest bearing accounts and
then distributes the money as needed to purchase the replacement
property.
There are strict time limit rules that must be observed. The
time limits for the Section 1031 Exchange starts with the "initial
transfer date" which is the date of closing on the sale
of the Las Vegas home or other property being sold. Within 45
days from the initial date you must formally identify your possible
choices of replacement property. One hundred eighty days from
the initial transfer date, the previously identified replacement
property titles must be in your name.
The regulations permit the Las Vegas real estate investor
to identify more than one possible replacement property. The
maximum number of replacement properties that you may identify
under the two main rules is:
Three properties of any fair market value or
Any number of Las Vegas properties if the fair market value
of properties identified does not exceed 200% of the aggregate
fair market value of properties relinquished.
The 1031 Exchange allows flexibility as to the type of
Las Vegas real estate that is accepted as a replacement property.
Therefore, it is not limited to any type of investment such
as rental property, vacant land, or property used in a trade
or business.
The only types of property that do not qualify are personal
use property and foreign real estate. There are no taxes due
under Section 1031 when there is no cash received and no debt
relief is obtained. There is no requirement that the exchange
be a "one for one" transaction, so one could divest one property
and replace it with two Las Vegas properties or vice versa.
One of the advantages is that the law imposes a tax upon the
investor on the boot received part and the receipt of boot does
not ruin the entire exchange. It simply triggers taxes on the
amount you receive as boot.
The tax-deferred exchange rules of Section 1031 apply to Las
Vegas business and Las Vegas investment real estate. The rules
do not apply to a personal home and may not be used for a second
home or vacation home having substantial personal use.
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