§1031 exchanges provide investors with a powerful tax strategy for preserving the value of an investment portfolio. Taxes on capital gains are not charged on the sale of an investment property if the money is being used to purchase another investment property.
For nearly 100 years, investors have been able to use the tax code to defer capital gains taxes through like-kind exchanges. Since 1984, Section 1031 of the tax code has provided investors a timeline of up to 180 days to complete the purchase of replacement property. Exchange deferrals can be continued through as many exchanges you wish. However, when you sell the property without reinvesting in a new property, there will be capital gains and depreciation recapture tax liability.
Advantage Wealth Solutions harnesses the tax code as a wealth building tool, working with investors to find quality replacement properties that meet short-term needs and long-term financial goals. We highly recommend you consult a professional tax advisor to ensure that you meet every requirement of Internal Revenue Code Section 1031. Failure to meet requirements can result in immediate tax liabilities and associated penalties. In addition, you must follow – to the letter – the strict timeline and procedural requirements for a proper 1031 exchange.