A 1031 exchange is a tax provision that permits a taxpayer to defer and not pay income taxes on the gain on the sale of trade or business asset or investment property, provided the taxpayer reinvests the proceeds into similar property within a certain period of time. In addition, under current law, these deferred taxes can be forgiven at death for up to approximately $ 10,860,000 for a married couple.
The following represents a short description of different types of exchanges that we perform for our clients.
Build to Suit Exchange involves the acquisition and construction of property within the applicable 180 day period.
Business Asset and Personal Property Exchange Business property, including, but not limited to, trucks, cars, planes, trains, buses, computers, equipment, franchises, intangibles, artwork, collectibles and the like can be exchanged as well.
Delayed Exchange Also referred to as a Forward Exchange, involves the sale of one or more pieces of property, the proceeds of which are held by a Qualified Intermediary, and the Seller identifies one or more replacement property (ies) within 45 days and completes the purchase of the replacement property (ies) within 180 days after the initial sale.
Improvement Exchange This type of exchange involves the use of the funds in the account balance to construct improvements on the property to be acquired.
Intellectual Property Exchange The IRS' position has moved from barely acknowledging the existence of Intellectual Property Assets to providing specific rules regarding the creation, purchase, sale, licensing and deduction of these assets.
LKE Exchanges For companies that exchange more than 100 tangible assets on a regular basis on a regular basis, taxes on the sale of tangible assets can be deferred without identification as long as the like-kind assets are sold and purchased within 45 days.
Similar to other personal property exchanges, Multi Asset Exchanges may involve the sale of a business or business location, such as the disposition of a restaurant.
Parking Arrangement Exchange When it is not possible to carry out the transaction within the typical 180 day period, such as a major construction project, or unique properties. This type of transaction is complex and deals in those situations when the amount of taxable gain may be very large.
Partnership Exchange Many advisors erroneously believe that Partnership interests may be exchanged. This is prohibited by federal tax law. Further, this can not be done by simply transferring the property right before the sale. This type of transaction involves a complex partnership tax provisions.
Foreign Owned Property Exchange Foreign Nationals that own property in the United States must comply with additional rules on withholding of tax at the source.
Property Owned Overseas Exchange by U.S. taxpayers may be exchanged for similar property located overseas. This involves complying with complex rules overseas for the ownership of foreign property by U.S. taxpayers.
Reverse Exchange involves the initial purchase of one or more replacement properties, held in the name of the Qualified Intermediary, for the benefit of the customer followed by the identification of one or more properties to be sold within 45 days and the sale of one or more properties within 180 days.
Tenant in Common Exchange is a certain percentage interest in a much larger real estate development. These properties are professionally managed and permit the new owner to receive monthly income without the aggravation or hassle of actively managing their properties.
Vacation or Personal Use Property Exchange While federal tax law has permitted the conversion of business use property to personal use for many years, recent changes may permit some or all of the gain on its later sale to be tax free to the Owner.
Collectible Exchange Persons who collect and own artwork and other collectibles and sell these types of investments, can defer an estimated 35% to 40% in taxes by choosing to reinvest in additional like-kind artwork or other collectibles. This can be accomplished by treating the sale and purchase of artwork or other collectibles as a Section 1031 Exchange. Assets in the “Artwork and Collectibles” category can include: lithographs, oil paintings, watercolors, sculptures, or other graphic forms of art, precious metal coins, and the like.
Transportation and Equipment Exchange Business owners can save and reinvest fleet earnings with Continuous Multi-Asset Exchanges (CMAES).
Precious Metals Federal tax law allows for the exchange of gold and silver coins and bullion.
Do you have questions about the various types of exchanges? If so, please don't hesitate to contact us.