Many people ask me questions along the lines of: "over the years I have invested a large amount of money into an investment property. How does this affect my taxes if I sell the property or if I die?"
First, I would like to talk about the sale vs. 1031 exchange part of the question, and then I would like to go into the ramifications of dying while owning the property.
Selling ~ The 1031 Question
Section 1031 is a very taxpayer-friendly provision of the internal revenue code. It gives you a way to sell your investment property without having to recognize the gains. This defers your taxes indefinitely…perhaps forever.
There are some rules and regulations that you must follow in order to get this tax deferral. One of the key rules is that your property must have been held for investment or for use in your trade or business. Watch the video below for more information on this:
Like-Kind Property
The other major requirement is that you have to re-invest your proceeds into like-kind property. If you have watched the video above then you have probably picked up that certain property held for investment can be exchanged for certain other like-kind properties that will be held for investment.
In a delayed exchange using a qualified intermediary, your proceeds from the sale must be invested in a like kind property within 180 days of the sale. Also, your replacement property must be identified within the first 45 days.
Remember, both your relinquished property and your new replacement property must be held either for investment or for productive use in a trade or business.
Start Your 1031 Exchange
Start your 1031 exchange today to defer your capital gains taxes on the sale of real estate. Contact CPEC1031, LLC to start the exchange process. Our intermediaries can walk you through every stage on your way to the closing table and answer any questions you may have along the way.
Start Your Exchange: If you have questions about the time value of money and Minnesota 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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