Potential Benefits of a Failed 1031 Exchange
Navigating the intricacies of a 1031 exchange that spans across two tax years requires a nuanced understanding of regulations and strategic planning. Here’s a comprehensive guide on handling incomplete exchanges and managing cash “boot” for maximum tax benefits. Installment Sale Treatment An exchange initiated towards the end of a tax year often extends into the […]
What Is “Boot” In The Context of a 1031 Exchange?
Definition The term “boot” is broadly defined as a taxpayer’s receipt of non-like-kind property in a 1031 exchange. As discussed more fully below, boot can come in many different forms. However, it is important to note that receipt of boot will not completely disqualify a 1031 exchange. Rather, only the amount of boot received by […]
Understanding Section 1033 Exchanges for Property Owners
In the realm of property ownership, Section 1033 takes center stage, particularly in situations involving the involuntary conversion of property. This scenario often unfolds when the government exercises its powers of eminent domain, a process where private property is taken for public use, typically with compensation to the owner. Property owners, however, find themselves navigating […]
What Is A Reverse 1031 Exchange, And What Are Its Advantages?
A reverse 1031 exchange is a strategic real estate transaction that allows investors to acquire a replacement property before selling their relinquished property, effectively reversing the standard order of a 1031 exchange. This article dives deep into the often-overlooked strategy of reverse 1031 exchanges, shedding light on their mechanics and their remarkable benefits. Mechanics of […]
Foreign Properties and 1031 Exchanges
Like-Kind Exchange Within the United States Under IRC §1031, U.S. taxpayers can freely exchange investment properties within the 50 states and the District of Columbia. This means that a property owner in California can trade their property for a similar one in New York without triggering capital gains tax. This rule provides a significant advantage […]
FIRPTA Withholding and 1031 Exchanges
Understanding FIRPTA: Foreign Investment in U.S. Real Estate The Foreign Investment in Real Property Transfer Act (IRC §1445 & Treasury Regulations §1.1445), commonly referred to as “FIRPTA,” is a federal law that imposes withholding requirements on certain real estate dispositions involving foreign persons. Let’s explore the key provisions of FIRPTA, including its exceptions. Definition of […]
Underperforming Assets and 1031 Exchanges
Underperforming real estate assets encompass a wide range of properties, including those in dire need of maintenance or updates, properties with high vacancy rates, or those situated in unfavorable locations. However, savvy investors can leverage the power of 1031 Exchange strategies to unlock incredible opportunities for selling these assets and strategically reinvesting in more promising […]
Depreciation Recapture in a 1031 Exchange
Depreciation plays a vital role in determining the adjusted basis of property, making it a crucial element in the non-recognition provisions of IRC §1031. It enables taxpayers to deduct a reasonable amount for the wear and tear experienced by investment or business-use property. When such property is sold or exchanged, the Tax Code mandates the […]
Handling Earnest Money Deposits in a 1031 Exchange
When purchasing real estate, buyers typically include an earnest money deposit with their offer to the seller. The deposit may be refundable or non-refundable, depending on the conditions of the purchase agreement. In general, the delivery of the deposit serves as evidence of the buyer’s intention to buy the property and is usually refundable. However, […]
Further Deadline Extensions for Taxpayers Affected by California Weather
The IRS has issued further postponements of the 45-day and 180-day deadlines as follows: New California Postponement for disaster beginning December 27, 2022: Alameda, Butte, Calaveras, Colusa, Contra Costa, Fresno, Glenn, Humboldt, Los Angeles, Marin, Mendocino, Merced, Monterey, Placer, Sacramento, San Benito, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, […]