Whether you are a business owner that purchases property or an individual that has investment property, when it comes time to sell the property you can be looking at large gains. One way to defer the gain on the sale of the property is by doing a like kind exchange also known as a Section 1031 deferral. Although the details can be complex the basic rules to a like kind exchange to occur is:
1. To identify property that is the same nature or character of the property being sold “like kind” property
2. That the entire transaction from sale of old property to identification and purchase of new property, occur within specific time limits
3. That no other items such as cash or non like-kind property be included in the transaction or tax will be triggered
If your property qualifies for a 1031 transaction then the gain that would have been recognized on the sale of your original property will be deferred up to the point you sell the new property purchased. This deferral will result in zero tax being paid in the year the property is sold.
As mentioned above the 1031 rules are very complex so it is important that if you believe you may qualify to contact us for further details.