When you sell a business or investment property you may have an overall gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain, if you reinvest the proceeds in similar property as part of a qualifying “like-kind” exchange. Financial gains deferred in a like-kind exchange under a 1031 Exchange is tax-deferred, but it is not tax-free.
The 1031 exchange can include like-kind property exclusively, or it can include like-kind property along with cash, liabilities and property that are not like-kind. If you receive cash, relief from debt, or property that is not like-kind, however, you may trigger some taxable gain in the year of the exchange. There can be both deferred and recognized gain in the same transaction when a taxpayer exchanges for like-kind property of lesser value.
At Franks & Roeder we can determine if you qualify for a 1031 Like-Kind exchange and how to structure the exchange based on your specific situation to achieve the best benefit for you.
If you do not specifically follow the rules for like-kind exchanges, you may be held liable for taxes, penalties, and interest on your transactions. David J.Franks has completed hundreds of these transactions, making sure all documents are accurate and filed on time, potentially, saving thousands of dollars in penalties.
Beware of Scams and Inexperienced individuals
You should be wary of individuals promoting improper use of like-kind exchanges. Typically they are not tax professionals or a qualified attorney. Sales pitches may encourage taxpayers to exchange non-qualifying vacation or second homes. Many promoters of like-kind exchanges refer to them as “tax-free” exchanges not “tax-deferred” exchanges. You may also be advised to claim an exchange despite the fact that they have taken possession of cash proceeds from the sale.
Call David J. Franks today for additional assistance with IRC Section 1031 Like-Kind Exchanges At:
Franks & Roeder
563-362-3288 ext. 1
5167 Utica Ridge Road
Davenport IA 52807