With any 1031 exchange, there are various benchmarks you need to meet and rules you need to abide by in order to defer your capital gains taxes. In this article, we are going to talk about some best practices when dealing with 1031 exchange rental property.
Rental Property Best Practices
Some taxpayers purchase replacement properties that they may one day move into, but for the first few years after completing their exchanges, they are careful to actually rent the replacement properties out for a substantial period of time to satisfy the requirements for their 1031 exchange. How long should they rent out their properties? The longer the better.
It’s interesting that the rules for excluding your gain on the sale of your personal residence under IRC Section 121 have special requirements and allowances for properties that you previously 1031 like-kind exchanged into. It’s also interesting that the IRS has created safe harbors for replacement properties that are put into rental pools, and still allow the taxpayer to use the property on a limited basis for personal use.
Defer Taxes with a 1031 Exchange
A 1031 exchange can help you defer your capital gains taxes on the sale of investment real estate. The qualified intermediaries at CPEC1031, LLC can help guide you through the entire 1031 exchange process and answer all of your questions. We have over two decades of experience working on 1031 exchanges of all types. Contact us today at our Minneapolis office to learn more about the like-kind exchange process and see if your property qualifies.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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