What is a 1031 Exchange?
A 1031 exchange, also known as a like-kind exchange, is a strategy used by financially savvy investors to defer capital gains tax that may arise from the sale of a business or investment property. The tax deferral is possible if the proceeds from the sale are reinvested into a similar property or properties of equal or greater value. Here are the different types of 1031 exchanges Bilodeau Capalbo can assist you with:
Delayed Exchange: This is the most common type of 1031 exchange. In a delayed exchange, an investor sells the original property before purchasing a replacement property. There’s a 45-day window to identify potential replacement properties and a total of 180 days to close on the replacement property.
Simultaneous Exchange: In this type of exchange, the original property and the replacement property are exchanged on the same day. This type requires impeccable coordination and timing as any delay can disqualify the transaction from 1031 treatment.
Reverse Exchange: This is a situation where the replacement property is purchased before the original property is sold. It is more complex than a delayed or simultaneous exchange and typically requires the use of an exchange accommodation titleholder (EAT) to hold title to the replacement or relinquished property until the exchange is complete.
Construction or Improvement Exchange: In this type, the investor can use the exchange proceeds to improve the replacement property while it’s held by a qualified intermediary or exchange accommodation titleholder.
Partial Exchange: This occurs when the investor doesn’t reinvest all the proceeds from the sale or the replacement property is of lesser value. The investor will need to pay taxes on the difference, also known as “boot.”
Each type of 1031 exchange has specific rules and requirements, and it’s important to work with a knowledgeable advisor or attorney, like Bilodeau Capalbo, to ensure all regulations are met. If not executed properly, an investor could be liable for unexpected taxes and penalties.
1031 Tax-Deferred Exchanges
Bilodeau Capalbo, LLC provides extensive support for clients interested in leveraging real estate transactions for tax advantages and portfolio growth, especially through Section 1031 exchanges.
Section 1031 Exchanges: Section 1031 of the Internal Revenue Code allows investors to defer capital gains taxes on the sale of a property, provided that the proceeds are reinvested into a “like-kind” property. Bilodeau Capalbo, LLC can structure these tax-deferred exchanges, helping clients navigate the complex rules and timelines associated with them.
Strategic Advice: In addition to our technical expertise, Bilodeau Capalbo also provides strategic advice on the sale of property and exchanges, helping our clients align these transactions with their broader financial goals.
Network Utilization: Bilodeau Capalbo, LLC also leverages their network of business partners to assist in the process of tax-deferred exchanges, providing clients with a comprehensive suite of services.
Whether you’re an experienced investor or new to real estate, Bilodeau Capalbo, LLC’s expertise in real estate transactions can be an invaluable resource in maximizing your return and expanding your portfolio. Contact Bilodeau Capalbo for your 1031 Exchange requirements at 401-300-4055.