Forward exchanges are a fantastic tax strategy to keep your money compounding and working for you in bigger investments. However, there are numerous rules and regulations you need to abide by to make sure your 1031 exchange is recognized as such. An experienced qualified intermediary is a crucial element to ensure a successful 1031 exchange. Contact our Duluth qualified intermediaries today – 218.831.1031.
Forward Exchange – The Most Common Type of 1031 Exchange
There are several different types of 1031 exchanges, but forward exchanges are the most widely used. Here’s how a forward exchange works:
- You sell a piece of relinquished property (either real estate or personal property).
- Then, instead of paying capital gains taxes on the sale of that property, you move your cash proceeds into another like-kind property.
- This allows you to defer a hefty capital gains tax hit and keep your money working for you.
It’s not quite as simple as that though. The IRS requires you to complete your exchange within 180 days after the sale of your relinquished property. You have the first 45 days of that 180 day period to identify the new property or properties that you intend to purchase in your exchange. Additionally, there is a like-kind requirement that states that your relinquished property and your replacement property need to be like-kind to one another. If you’re exchanging real estate, that means you need to exchange into other real estate. For personal property, it’s a bit stricter. Business equipment can be exchanged for other business equipment, but not for a piece of artwork.
Forward 1031 Exchanges in Duluth, MN
There are many ins and outs of a 1031 exchange and many investors have gotten tricked up during the process and had their exchanges fail. A qualified intermediary can help you through the process and make sure all of your necessary documentation is prepared throughout the transaction.
Reach out to our Duluth 1031 exchange facilitators today to chat about your forward exchange. Whether you’re exchanging real estate or personal property, we have the experience and expertise needed to ensure your exchange goes off without a hitch – 218.831.1031.