1031 exchanges, we’re going to talk about them real quick, if you happen to have a property that you’re selling or buying that is large in nature, maybe not your primary residence or some other type of transaction, then you might be familiar with the ten thirty one exchange because it’s allowing you to take your income or your capital gains that you would have on said property and roll it in and get a step up in basis to the new price.
So that’s a concept here that a lot of people are familiar with, but some of them not. So we’re going to discuss that real quickly.
We have a couple of links that we’re going to show off. We’re going to discuss what a 10 three one exchange is, how it works and when you can utilize it. So we’re going to go ahead and split the screen and we’re going to show you a graphic first, because that’s the kind of the best way who likes to read. Let’s go ahead and click on a link and let’s see something instead.
So we have some rules for 1031 exchanges. The first thing is you have to be selling and buying a like kind property. So what that would mean is it would mean real estate for real estate. And your replacement property, if we scroll down just a little bit, should be of equal or greater value.
There’s rules that you can actually have several replacement properties that you can put in place and you can go over that with your 1031 exchange agent and they’ll be able to review those things with you. But it’s most likely for investment properties, business properties, larger parcels. Right. That you’d be exchanging because you would have a tax issue.
We typically don’t see that tax issue when it’s on your primary residence for several reasons. Not going to get into all of that right now. But it is a real thing specifically for business or investment type properties. Then it must involve the same taxpayer, whether that’s a business, an individual, whatever it is, we need to continue that on and have it be the same continuity, because what we’re doing is getting a step up in basis from what we paid initially to later on.
Think about this kind of maybe as an IRA for your property, that you’re deferring all of those tax that you have. There’s going to be a specific window with this and you’re going to want to watch the time frames that you have to identify a new property, which is 45 days, in which you can also go ahead and close on that. So you have one hundred and eighty days or roughly half a year to go ahead and do that in exchange set property for the new property so there’ll be a ten, thirty one agent.
There’s going to be intermediaries, there’s going to be things that happen. The Boo Boo is an amount that you exceed what you had. Had exchanged and you could have a tax basis on that, but we’re not going to go ahead and, you know, and discuss that, so we won’t worry about that. We do have an article on this one right here as well. So we’ll go ahead and share the ten thirty one article.
And it basically goes ahead and discusses with you on how you can defer capital gains and you can continue to build your wealth. That’s the whole idea. So imagine you have said profit on this property. You made whatever, however many millions. And I’m really happy that you’re making millions so you can go ahead and defer that.
And then what you’ll do is you’ll be able to continue to build on that rather than pay taxes on it. So it’s a great way to go ahead and take advantage of the tax laws that have been put in place for you to minimize how you are paying taxes and to maximize your investment money that you have in real estate.
So as we scroll down through here, we will also check this link in, because you might be highly interested to see more about a ten thirty one exchange and how that could help you and or your clients. So over to you in the links are going to be these two articles, one with a graphic and one with an article.
And then if this helps you out, we would appreciate giving a like a thumbs up or something along those lines in sharing this with others. Thank you guys very much. That’s going to conclude it for today. Talk to you later.