1031 Corporation is Going Green!

Going green is easy with a 1031 exchange. Green as in the Three R's - Reducing, Reusing and Recycling your capital gain tax dollars! The 1031 Exchange option is the perfect “green” way to hold onto your money and reinvest it into another like kind investment. Taxpayers should never have to pay income taxes on the sale of property if they intend to reinvest the proceeds in similar or like-kind property.

Through an IRS tax-deferred exchange, you are able to reduce your tax liability. A 1031 exchange provides the ability to defer the capital gains tax with the purchase of like-kind replacement property that would have been due and payable. For a real estate exchange, like-kind replacement property means any improved or unimproved real estate held for income, investment or business use.

Your Qualified Intermediary must hold and forward net proceeds from the sale of your property to the purchase of the replacement property. If you receive cash or have a trade down in value you may have "Boot". Boot is the money received or the debt reduction received by the taxpayer in an exchange. The rule of thumb for avoiding "boot" is to always replace with property of equal or greater value than the relinquished property.

The tax basis of the old property becomes the new tax basis in the replacement property. If you “bought equal,” the basis in the new property is the same as it was on the old property. In a 1031 exchange, the basis rolls forward from the old property to the new property. If your replacement is a trade up in value you will be able to increase your basis by the amount of the trade up. This trade up allows you to increase the amount available to be depreciated.

Just remember the three R's for going green are Reduce, Reuse, Recycle. 1031 Corporation is ready to assist you in Reducing your tax liability, Reusing your proceeds from the sale of your relinquished property on the purchase of your replacement property and Recycling your ability to depreciate by purchasing up in value on the replacement. Are you ready to go green? Give us a call today at 888-367-1031.