Bozeman, MT – Montana 1031 exchange accomodater, 1031 Property Exchange, warns real estate investors to never sell investment property without first talking to a 1031 exchange accomodater that understands the IRC Section 1031 rules.
“I’ve had conversations with several investors in the past few months that had to pay all the taxes on income property sales because either their accountant, or real estate agent, did not know the 1031 rules”, says Rusty Squire, Montana 1031 exchange accomodater. He adds, “A simple phone call to us could have saved these investors tens of thousands of dollars in taxes that are now going to have to be paid”.
“People often assume that their accountants and real estate agents know the 1031 regulations but in my 20 years of experience I can tell you that many do not”, says Squire. He adds, “One investor called just last week, the day after his property had closed, and the title company had recorded the deed, which is too late”.
UNDERSTANDING WHAT CONSTRUCTIVE RECEIPT MEANS
“Once proceeds from a sale transaction have been distributed to a property owner it ends their ability to complete a 1031 exchange because they have now violated the provision of constructive receipt”, says Squire. He adds, “Exchange documents and qualified escrow accounts must be established prior to closing so that this does not happen”.
THE TRUTH ABOUT LIKE-KIND PROPERTY
“Another provision of the code that gets completely misinterpreted are the rules regarding “like-kind” property”, says Squire. He adds, “The only thing “like-kind” means is that you must be moving money from real estate back into real estate that is held for business or investment purposes, in other words, not for personal use”.
THE CAVEAT TO PERSONAL USE
“Any investor can use their investment property for up to two weeks per year of personal use and they are allowed another two weeks of marketing and maintenance visits”, says Squire. He adds, “This means you can use an investment property for up to four weeks per year if it is documented and handled appropriately”.
CONVERTING INVESTMENT PROPERTY INTO PERSONAL USE
“It is possible to convert an investment property held for longer than five years to personal use without having to pay the capital gain and depreciation recapture taxes”, says Squire. He adds, “The IRS has provisions saying that the taxes owed are reduced by 20% per year for each year of ownership, which means after five years you can convert a property to personal use, which is a great way top acquire second homes for future use”.
NOT UNDERSTANDING THAT DEBT CAN BE TAXED
“Many investors mistakenly think that the only thing they need to replace in exchange is their net equity, or the amount that was distributed upon the closing of their sale”, says Squire. He adds, “If you had debt that was extinguished in the sale of your relinquished property it has to be replaced in your replacement property or you will be taxed on it”.
“I’ve seen millions of dollars paid in taxes unnecessarily over my 20 years because investors simply did not understand the rules I have outlined above”, says Squire. He adds, “One phone call to us at 406-425-2742 and all of this tax liability could have been eliminated”.
If you need questions answered regarding investment property you can reach Rusty Squire at 406-425-2742.
Company Name: 1031 Property Exchange
Contact Person: Russ Squire
Email: Send Email
Address:1087 Stoneridge, Suite 2A
Country: United States