In the realm of 1031 exchanges, there is an important distinction between property held for investment purposes and property held as inventory. In this article, we are going to discuss the difference between inventory and investment property for 1031 exchange purposes.
It All Comes Down to Intent
In essence, investment property is held for appreciation in the hopes that it will increase in value as an investment. By contrast, inventory is property that you purchased with the aim to resell at some point.
If you purchase a property with the intent to flip the property quickly for a profit, that would be considered inventory and not investment property. This is an essential, often misunderstood distinction in the realm of 1031 exchanges. You cannot do a 1031 exchange of property held for inventory purposes, but you can do an exchange with property held for investment purposes.
When embarking on a 1031 exchange, you need to make sure that your mental intent lines up with the 1031 exchange requirements. In other words, you need to intend to hold your property for investment or business purposes and you can’t just list it for resale shortly after acquiring it.
1031 Exchange Your Investment Real Estate
Exchange your investment real estate using section 1031 of the Internal Revenue Code to defer your capital gains taxes and keep your money working for you in a continued investment! To begin your exchange, contact a qualified intermediary at CPEC1031, LLC. We have over twenty years of experience facilitating exchanges of all types both in Minnesota and across the United States. Reach out to our 1031 exchange professionals today to learn more about the tax-saving benefits of a 1031 exchange and see how we can help you!
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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