Like-kind Exchanges

A US like-kind exchange (1031) allows the sale of one asset and the purchase of another similar thing without a tax requirement.

LIKE-KIND EXCHANGES ARE MORE THAN JUST COMPLIANCE WORK!! WE INCREASE VALUE!!

A like-kind exchange (1031) is a tax-deferred exchange in the United States that allows the sale of one asset and the acquisition of another similar item without creating a tax obligation on the sale of the first asset. A like-kind transaction can involve the exchange of one firm for another, or one real estate investment property for another.

If you want to avoid paying capital gains taxes on appreciated real estate, a like-kind swap may be the solution. The IRS allows you to defer capital gains if you exchange it for property of the same type or character.

Most real estate swaps can be considered like-kind exchanges as long as neither property qualifies as your primary residence. You could, for example, exchange farmland for an apartment building of similar or better worth without realizing any gain at the time. The amount of deferred gain reduces your basis in the new property.

Consult an expert before attempting a creative like-kind swap arrangement. In this circumstance, there are unique regulations regarding who can qualify as a facilitator, and timing is important.

You can delay gain on a like-kind trade, but you must also defer loss on the exchange. As a result, it may be prudent to sell properties whose fair market worth is less than their undepreciated base.

The like-kind exchange is a potent tax-cutting tool, but preparing and executing one is a hard and delicate process. If you own property and are thinking about a like-kind trade, contact SGRNY LLC first.