Fraxioned will work with you and your accounting/legal team to satisfy the requirements under IRS section 1031. We strongly recommend the use of a professional team to ensure that the exchange is not disqualified.
In general terms, you can avoid recognizing a gain on a property if there is an exchange for another like-kind property and if you meet the other conditions from the IRS.
Taking control of the proceeds from your asset sale before the exchange is complete will likely disqualify the entire transaction and make the gain immediately taxable. The best way to avoid the receipt of proceeds is to use a qualified intermediary to hold those proceeds until the exchange is complete.
Taxes on capital gains are as follows:
To have a successful exchange, you must consider these 2-time limits:
IRS rules allow you to name more than one replacement property. There are 3 rules to consider:
*For more information about how Fraxioned can assist you in your 1031 exchange, contact us at: [email protected]
To qualify for a 1031 exchange, the properties involved must be considered "like-kind." This generally means that real estate must be exchanged for real estate, and personal property must be exchanged for personal property of the same nature or character. There is some flexibility within these categories. For example, an apartment building can be exchanged for a strip mall, or a piece of raw land can be exchanged for a rental property.
Yes, it is possible to do a partial 1031 exchange, where only a portion of the proceeds from the sale of the relinquished property is transferred in the replacement property. In this case, the seller would have to pay capital gains taxes on the portion of the proceeds that were not used for the new property purchase. The portion utilized through the 1031 exchange would still benefit from tax deferral.
According to IRS rules, certain transactions and property types are not allowed in a 1031 exchange. These include personal use properties like primary residences, stocks and bonds, dealer properties intended for sale, foreign real estate, personal property like furniture, and property acquired with immediate resale intent. Consulting a tax professional is recommended to understand eligibility and compliance requirements.
In most cases the tittle would be held as Tenant in Common (TIC). TIC is a legal ownership structure where multiple investors may own an undivided interest in a real property asset. Owners can hold unequal shares and they can sell their shares independently from other tenants.
*Fraxioned Corp and its affiliates do not provide tax, legal, or accounting advice. These FAQs are for informational purposes only, and are not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Fraxioned makes no representations or guarantees regarding the economic benefits to be derived from the purchase or resale of the Interest or rental of the Property.
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