Are you interested in utilizing the 1301 exchange rule and require the assistance of Ohio real estate lawyers? The 1031 exchange rule is a very useful rule that may be used to defer the taxes that are incurred from property transactions. Essentially, the rule allows for the investors to purchase or sell comparable properties and defer the capital gain taxes.
There are specific guidelines that determine which properties are acceptable to qualify for the 1031. The following list covers some of the basic rules that govern the 1031 exchange.
Properties that do not qualify for the 1031 are:
- Personal residence
- Development land
- Resale property
- Partnership interests
The property which will qualify for the 1031 exchange rule shall be a property that is "held for purposes of investment or those that are used in a taxpayers' business or trade". In a real estate transaction where the property taxes are deferred through the 1031 rule, the real estate must be replaced with like kind real estate. When applying the rule for equipment, the same applies. The equipment must be of like type as well.
The main advantages to the rule are that, an investor may be able to benefit from the sale of a property investment or business property without having to pay the federal income taxes on the capital gains after the transaction. The taxes may be deferred by reinvesting into a property of like kind. Simply purchasing another property after the initial transaction as a replacement will not suffice. There must be a like exchange.
Generally, there are three types of exchanges. A simultaneous exchange is one where the property that is being released and its substitute property are transferred at the same time, on the same day. A delayed exchange, is one in which the property that is being replaced, is closed at a later date than the one that is released. This type of exchange is commonly referred to as a "Starker Exchange" which is a reference to the well known Supreme Court ruling where the tax payer won a case for the exchange prior to the writing of the allowance of the exchange in the IRS Code. A reverse exchange or a title holding exchange, is where the property to be substituted is purchased and closed prior to the succeeding property is acquired. Normally, an intermediary will be designated to convey the title of the succeeding property over to the taxpayer. For an understanding of the specific details on the Safe Harbor guidelines, it is best to seek the advice of qualified commercial real estate attorneys.
Do you need Ohio real estate lawyers to assist you with the 1031 exchange rule?
Contact the Ohio real estate lawyers at the law offices of Tomb Roberts & Bucio, LLP today.