1031 Tax Exchanges

Central Florida Real Estate and Investment Properties
Specializing in the Kissimmee, Orlando, St. Cloud, Disney areas.

4499 W. Hwy 192
Kissimmee, FL 34746
407-396-4009
1-800-544-7646

Commercial Investment Properties

Understanding the 1031 Tax Exchange can be very beneficial to you if you plan on relocating, or moving. However, the guidelines of this great offer are rarely understood, and knowing the limitations and exceptions of this magnificent offer can save you an abundance of cash and help you avoid taxes all together.

The 1031 Tax Exchange Plan allows you to relocate and avoid taxes by relocating your funds to a secure bank account. Once inside this account your money cannot be touched for a period of 45 days. During this period Diversification, Consolidation, Leveraging and Relocation are all possibilities while under the 1031 Tax Exchange, during this time you will not be penalized for recapture or capital gains. One of the most emphasized rule under the 1031 Tax Exchange is that the properties exchanged must be of Like-Kind of the same quality or nature.

An example of this rule would be if a property owner acting under the 1031 Tax Exchange plan was to acquire a property with a lease that does not require management. However if the proper is not of Like-Kind the consequences are a Mortgage or Cash Boot. The best way to avoid a Mortgage or Cash Boot is to bring cash to the properties closing, as a way of covering the losses for a relinquished property, or trade for a property of higher value.

When the transactions take place, there must be a Qualified Intermediary to ensure that the exchange meets the 1031 Tax Exchange requirements. The Intermediary must have received a written document describing the aspects and value of the property. One of the 1031 Tax Exchange Rules is that the property you are purchasing is of equal or greater value that the previous owned property.

Three rules have been set in place to prioritize the goal of selecting a new property. These rules are the Three Proper Rule, the 200 percent rule or the 95 percent rule. These three rules are imperative to follow or the property cannot be purchased.

Transactions that fall under the 1031 Tax Exchange are Reverse Exchange, Exchange, Improvement Exchange, Simultaneous Exchange, Personal Property and a Delayed Exchange. These are common transactions and are well within bounds for the 1031 Tax Exchange.

To end the exchange the person or entity that began the transaction must be the one to close the exchange. However, after profits have been placed within a secure bank account you have a following of 45 days to find and close on another qualified property. The bank account that secures the profits during these 45 days cannot be a personal investor’s personal account, if so, the exchange will be disqualified. If you cannot find and close on a property within 45 days, you must wait a full 180 days until you can require your deposited funds.

A triple Net is known as a NNN and is more frequently referred to as an Equity investment other than a cash flow investment. With the correct understanding these Commercial NNN Properties can be beneficial to you. An NNN is finding a tenant to pay for all three nets of a property, these include; real estate taxes, maintenance and insurance. By doing so the tenant then becomes responsible for all the costs of maintenance, purchases and repairs.