When property investors enter into transactions to buy or sell a real estate asset, they often incur enormous tax liabilities. This makes them think twice before finalizing the negotiations for the transfer of their property, which may have a high market value. While many of these investors know that tax-free exchanges do exist, they are unaware of how they function and can benefit them. This is the reason why they prefer to hold on to their existing real estate assets for a long period or buy replacement properties that are beyond their reach.
The Welfont Group is a prominent American commercial brokerage company that helps its clients to find, consider, scrutinize, sell, buy, finance and manage their real estate properties. The professionals of this corporate enterprise specialize in adopting tax saving strategies like 1031 Exchange to help their clients maximize the proceeds from the sale of their properties. They also go out of their to represent the interests of organizations that IRS declare as tax exempt in addition to their real estate customers. Over the last 20 years, they have been instrumental in helping their client complete real estate transactions worth over $200 million. They deal in a wide range of real estate properties, which include land, factory plant, office apartments, hotels, schools, retail stores, banks and hospitals.
The experts in this company assist their customers sell their commercial properties through the 1031 Exchange while taking advantage of the less known provisions of IRS Section 170 Bargain Sale. If the parties to the property transfer execute this scheme properly, the real estate investors can dispose of property they hold in 1031 exchange. Moreover, they can get immediate cash from transaction as per the provisions of Section 170 in addition to paying very little or no capital gain tax. However, it is important for such sellers to aware certain important points:
According to prescribed regulations of 1031 exchange, it is essential for real estate sellers to recognize three possible replacement properties within 45 days from date of sale of their current asset. If the value of the replacement properties twice the value of their previous asset, they have to buy 95% of the properties;
The real estate seller has to purchase another property within 180 days from date of finalizing the sale of the previous asset or on any extension in his/her tax return;
- Trade Up
The market value of the new property that the real estate investor acquires must be more than the sale value of his/her previous asset to claim 100% exemption from capital gains tax. Otherwise, he/she will have to pay tax on the difference between price he/she receives for the old property and amount he/she pays for the new asset.
The provisions of 1031 Exchange does not mention any specific period for the investors to hold their real estate asset. However, IRS will verify whether or not the owner held the property in question as a productive asset.
Welfont Group experts recommend real estate investor to pay close attention to the above point when selling their properties through 1031 Exchange.