1031 Exchange

The Last Great Tax Shelter

Did you know that it is possible to sell certain qualified properties without paying capital gains taxes in the year of the sale? Title companies, real estate professionals and many casual investors already know about laws regarding 1031 exchanges, but some confusion still exists among new investors and even some seasoned investors when it comes to 1031 exchange properties.

At Precision Global Corporation, we recognize the benefits of saving hundreds of thousands of dollars in capital gains taxes in order to fully optimize your portfolio. That’s why every project we take on is fully 1031 compatible.

Real Estate Exchange

1031 Exchange Properties:
The Basics

A 1031 exchange is basically a swap of one investment property for another. An investment property is sold, a qualifying 1031 replacement property of equal or greater value is purchased, and any capital gains taxes on the sale of the initial investment property are deferred until you no longer are interested in making further 1031 investments and you sell your property. The fact that this process lets you maximize your investments, and thus your potential returns, might be the most exciting 1031 exchange information you can learn, but there’s much more.

Is A 1031 Exchange Right For You?

A 1031 exchange, also called a Starker Exchange, is an extremely useful tool for deferring your taxes. This strategy is used by the most successful real estate investors in the world. If you’re interested in doing a 1031 exchange or need more help understanding the process of acquiring a 1031 replacement property beyond what this page explains, please don’t hesitate to call us. One of our representatives will be glad to walk you through every step of the way and look at ways a 1031 Exchange may be the right fit for investment strategy.

5 Common Questions About 1031 Exchange:

Real estate investors are painfully aware that capital gains taxes can significantly dent the benefit of selling an investment property. A 1031 exchange, involving a new investment opportunity, can reduce and delay the financial impact by deferring any capital gains taxes that would otherwise be due in that tax year. These “savings” can translate to a larger subsequent investment, allowing for even more tax-deferred growth so you can fully optimize your portfolio.

For those new to investing who are wondering, “What is a 1031 tax exchange?” what follows is a primer. This information also can serve as a refresher for seasoned investors, or clear up any confusion. Precision Global Corporation also can answer any questions you have about 1031 exchanges. This is our area of expertise. We manage general and limited partnerships, and every project we take on is fully 1031 compatible.

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A successful investment in real estate is worth celebrating. If you plan to parlay the proceeds and make another investment in a different property, however, there’s one hitch. To maximize the potential of the follow-up investment, you must qualify for a 1031 exchange. This investment tool, covered in Section 1031 of the Internal Revenue Code, allows you to defer the capital gains taxes on the first investment and put more of your gains back to work for you.

Before we delve into some of the basic real estate 1031 exchange requirements, it’s worth noting that the Tax Cut and Jobs Act that went into effect on Jan. 1, 2018, essentially left the law alone as it pertains to real estate investments. Read on to learn more about the 1031 tax-deferred exchange requirements that your transaction must meet in order for you to defer your capital gains taxes.

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A real estate investment involving a 1031 exchange allows the investor(s) to postpone paying any capital gains taxes on a property sale until it’s more advantageous. Anyone planning to make such an investment should understand how 1031 exchanges work. The simplest way to define a 1031 exchange is as a swap of one real estate property for another. However, there are numerous 1031 exchange rules, beginning with a requirement that both properties must be in the United States. To take full advantage of the benefits of this type of investment, one must understand the 1031 tax exchange rules as clearly and completely as possible. Here’s a look at some of the basic rules: 

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The potential benefits of investing in real estate using a 1031 exchange are significant enough to consider doing so. If you are interested in selling a property but believe the traditional process would offer limited benefits at this time, it may be time to consider how a 1031 exchange can help you.

The chance to maximize profits and defer capital gains taxes are among the reasons to consider this real estate investment opportunity, but timing can be a key factor. There are a couple of situations in particular that make for an optimal 1031 exchange time frame. A 1031 exchange can represent an opportunity for a “bailout” of sorts on a poor investment, or it can provide tax benefits on an investment that has performed extremely well. Every situation is unique. This is why it is important to have a professional by your side to help you through the process.

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For many investors, a strategy that involves a 1031 exchange can be an excellent way to build a portfolio. A 1031 exchange allows you to defer payment of capital gains taxes on real estate gains, which lets you maximize the amount you put into your subsequent real estate investment. However, the process is very specific, and there are many limitations. Mistakes in the process could result in having to pay a significant amount in taxes sooner than you planned. It is extremely beneficial to work with a company to help you through the process. For those who wish to learn more, consider what the 1031 exchange process looks like.

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The Benefits of Working With Precision Global Corporation

Investing in real estate can provide some tax advantages and capital appreciation potential not available with other investment classes. At Precision Global, we’ve spent the last decade creating quality assets and partnering with our investors to change the trajectory of our collective portfolios and investment goals. Give us a call today to talk about how we can help you achieve your financial goals.

*Note: We are not Certified Public Accountants and this is just to give you a basic understanding of how a 1031 exchange works. Every state has a different Capital Gains tax rate. Please consult with your local tax official to get more state-specific information.

Still have question about doing a 1031 Exchange?

Contact us and we’ll be more than happy to walk you through it!