1031 Tax Deferred Exchange And Tenant In Common: The Main Advantage Is Being Able To Defer Paying Capital Gains Tax - Part 1

A few years back or more precisely in March of the year 2002, the IRS came out with its Rev. Proc. 2002-22 that laid out the parameters that spelled out how structure TIC transactions would enable investors to complete 1031 TIC exchange while also recognizing the fact that the exchange involved valid investment property (like-kind). This is perhaps the most important aspect as far as 1031 Tax Deferred Exchange and Tenant in Common goes.

Not A New Concept

In fact, 1031 Tax Deferred Exchange and Tenant in Common is not something with which people were not already conversant with because in fact, most people are well aware of saving money through deferring paying capital gains tax provided they did the 1031 exchange in the proper manner. As a matter of fact, everybody knows that TIC is nothing but being able to co-own properties and furthermore, as long as such co-ownership is organized in the proper manner, investors may get out of hundred percent ownership in properties that they have relinquished and instead get into co-ownership or exchange into properties in which they have fractional ownership or TIC as it is also commonly known as.

1031 Tax Deferred Exchange And Tenant In Common: The Main Advantage Is Being Able To Defer Paying Capital Gains Tax - Part 2

Also, when considering 1031 Tax Deferred Exchange and Tenant in Common, you can’t help but be impressed by the advantage that you get with regard to deferring on paying capital gains tax. All that is required is for you to deal in structured property and to ensure that your circumstances as well as actions strictly adhere to 1031 rules. If you ensure these conditions are complied with, as an investor you can then sell your high value property and then defer, though not avoid, paying capital gains tax.

Keeping in mind this very important aspect with respect to 1031 Tax Deferred Exchange and Tenant in Common, investors will naturally be motivated in dealing in TIC properties though before proceeding further, it is always a good idea for them to get professional advice from an accountant, qualified attorney or other kind of advisor who knows the ins and outs of 1031 Tax Deferred Exchange and Tenant in Common and who can thus guide you to take the proper steps to qualify for 1031 tax deferred exchange.

By using 1031 Tax Deferred Exchange and Tenant in Common to defer your capital gains, the amount so deferred can then be put to use in buying a new, though like-kind, property. It thus means that with more money being invested rather than paying it out in the form of taxes, you can then apply this cash to create larger investment in equity.

1031 Tax Deferred Exchange: Many Options That Each Provide Many Advantages - Part 1

One aspect to choosing 1031 Tax Deferred Exchange is that you will confront numerous options from which to make up your mind and yet be sure that whichever option you choose it will help make you a considerable amount of money such as saving on paying capital gains tax at the time of selling your current investment property in order to acquire a fresh one. In fact, it would be to your advantage to, first of all, seek out professional advice before proceeding further with regard to 1031 Tax Deferred Exchange.

List With Real Estate Brokers

Having decided that 1031 Tax Deferred Exchange is what you want, you must then list with a real estate broker all of your existing properties and also ensure that such list includes an agreement that clearly states that you are using your property to complete 1031 Tax Deferred Exchange.

To be sure, if you go in for 1031 Tax Deferred Exchange, you will then be in a good position to roll-over all of the monies you receive when you sell your investment property which monies in turn must be used to purchase one or even several similar (like-kind) investment properties. However, during closing the proceeds must be transferred to a Qualified Intermediary who will keep the proceeds from the sale till such time as these proceeds are to be used to buy new like-kind property.

1031 Tax Deferred Exchange: Many Options That Each Provide Many Advantages - Part 2

As mentioned, 1031 Tax Deferred Exchange permits you to also defer your capital gains tax as long as the entire amount of money from the sale of a property is used in purchasing similar (like-kind) investment properties. Thus, this deferment is tantamount to getting an interest-free loan for the entire amount that you would have spent on the cash sale which means that you get to retain more equity which in turn makes it possible for you to obtain properties with still higher values while of course, using 1031 exchange.

However, 1031 Tax Deferred Exchange is only applicable as long as you sell real estate that is investment oriented and it won’t hold true if you are selling personal residential property. Also, the properties in question must be similar or more precisely like-kind which means that if you are exchanging real property then the two properties in question must both be real properties. In fact, there is also nothing stopping you from exchanging a single property for many properties or even buying a single property from the proceeds of many properties.