What is a 1031 exchange?
Under section 1031 of the Internal Revenue Code, a real property owner can sell his property and then reinvest the proceeds in ownership of like-kind property and defer the capital gains taxes. To qualify as a like-kind exchange, property exchanges must be done in accordance with the rules set forth in the tax code and in the treasury regulations. The 1031 exchange can offer significant tax advantages to Las Vegas real estate buyers. Often overlooked, a 1031 exchange is considered one of the best-kept secrets in the Internal Revenue Code.
Who should consider a 1031 exchange?
If you have real property that will net you a gain upon sale (generally property that has been substantially depreciated for tax purposes and/or has appreciated in fair market value), then you are exactly the person who should consider a 1031 exchange.
There are 5 tax classes of property:
1) Property used in taxpayers trade or business.
2) Property held primarily for sale to customers.
3) Property which is used as your principal residence.
4) Property held for investment.
5) Property used as a vacation home, for example, Lake Las Vegas homes.
Section 1031 applies to the first and fourth categories, and potentially the fifth category. Business use is defined as, “To hold property for productive use in trade or business.” Property retired from previous productive use in business can be qualifying property. Investment purpose defined as real estate, even if unproductive, held by a non-dealer for future use or increment in value is held for investment and not primarily for sale. Investment is the passive holding of property, for more than a temporary period, with the expectation that it will appreciate. Property held for sale in the immediate future is not held for investment.
Why should you consider a 1031 exchange?
* Defer paying capital gains taxes.
* 1031 exchanges can provide real estate investors with the opportunity to defer all of their capital gains taxes. By exchanging, the investor essentially receives an interest-free, no-term loan from the government.
* Relief from property management. The lessee takes the responsibility to sublet and maintain the property allowing real estate buyers to avoid most of the day-to-day management headaches.
* Upgrade or consolidate property.
* Diversify. Own multiple properties rather than just one.
* Relocation to a new area.
* Differences in regional growth or income potential.
* Change property types among residential, commercial, retail, etc.
A key element of any solid business plan is the protection of assets. Minimizing your tax liabilities in addition to other operating expenses is equally as important as maximizing your revenues. Prudent businesses protect their hard-earned assets by engaging the services of a professional to facilitate the use of a tax deferred 1031 exchange. Fortunately, you have a dedicated Las Vegas real estate professionals to maximize the success of your 1031 exchange in Las Vegas Real Estate.
Want to be part of the Las Vegas luxury real estate boom? Selling or buying a piece of Las Vegas Real Estate today? Call 702-505-6988 for more information and VIP representation by a Las Vegas Luxury Real Estate REALTOR for investment Las Vegas Real Estate, 1031 exchange, condos such as Trump, Turnberry, Allure, Panorama Tower, Turnberry, W Residences, commercial, residential and land.