1031 Exchange! What the heck is that?

If you own rental property, this is one of those things you should know about!

Section 1031 of the U.S. Internal Revenue Code allows investors (that you if you own a rental) to defer capital gains taxes on the exchange of like-kind properties.

Ok, so what does this mean?

First, let's explain what would happen if you were to sell you rental property and bank the money.....You get taxed... big time! (Typically 15-20%)

What's your other option? Answer: "An Exchange"

Here's how:

• All sale proceeds (difference in selling price and amount owed) go to an escrow account maintained by your attorney
• You then have 45 days to come up with a short list of replacement properties
• You can "identify" up to three properties at fair market value or you can identify more properties providing their total fair market value is not more than twice the value of the relinquished property. For instance, if you sell a home for $750,000 you can identify 17 replacement properties provided their total value is not more than more than $1.5 million
• You must make an actual purchase within 180 days after the original property transferred (property must be used in trade, business, or as an investment)

What does this accomplish: Essentially you can defer paying state and federal capital gains taxes and depreciation recapture until you die and your estate passes to your spouse, charity, children, or grandchildren.

Pretty cool right!

Joe Harrison

Avalon Properties Group

Cell: 912-230-4294

Office: 912-280-0304

www.RealEstateofGlynn.com