The 5 Basics of Completing 1031 Exchanges
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If you do not have any knowledge of a 1031 Exchange and you need to transact in it, then you need to seek assistance from a CPA. You must determine the amount of tax that you will have to pay for if you sold the property outright. This requires the specialty of the CPA. The accountant will also assist you to determine the capital gain and tax liability. Here's a good read about 1031 Gateway, check it out!
Having an accountant by your side is important in 1031 exchange because accountants have an in-depth understanding of these process and calculation and they will also advise you on whether the transaction would be worthwhile or not. Over time, your property appreciates thus gains value, and the CPA would determine how much of the gain is attributed to the appreciation. Such gains in appreciation are taxed at 15%. Depending on the tax laws in your state, the accountant will calculate your state or municipality tax liability from the gain. To gather more awesome ideas on 1031 Gateway, click here to get started.
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After determining the amounts of taxes that you would pay, you can decide to sell your property outright. You can also choose to defer the taxes with a 1031 Exchange. If you sell the property outright, it would be less costly to do 1031 Exchange compared to the tax bill.
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When you have all the information regarding the taxes that are relevant and their probable amounts, you can go ahead to call a Qualified Intermediary to inform them of your intentions to make a 1031 Exchange. You will also need to make a purchase agreement which must be signed by you as the seller of the property and the purchaser. The agreement must express your intentions to sell the property in the 1031 Exchange.
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The purchase agreement must emphasize a clause which states that you would like to complete a 1031 Exchange with the property and the purchaser has consented to the terms of sale and ready to cooperate and facilitate the transaction.
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The final stage is the closing, and you will complete your property sale. The purchaser will be handed the deed of the property, and the sales proceeds will be transferred to your Qualified Intermediary, and then your 1031 countdown will commence. Usually, you have 45 days identification period, and they start counting the day after closing. Within the time limit, you must identify the properties that you want to buy as a replacement. It is also the start of 180 exchange period that you will have to do 1031 exchange and purchase another property for replacement. Kindly visit this website http://www.wikihow.com/Perform-a-1031-Exchange for more useful reference.