Southern Exchange Services specializes in preserving your capital using a legal exchange process made possible by United States Internal Revenue Code, Section 1031. We are not tax-advisors, however, and will depend on your CPA or legal advisor for the details of your tax and capital gain status.
In a typical real estate or business asset sale, the property owner is taxed on any gain realized from that sale. Section 1031 of the Internal Revenue Code allows those gains to be deferred (not recognized) as long as there is an exchange of property held for productive use in a trade or business, or for investment.
A tax-deferred exchange allows an asset or property owner to exchange his property for one or more replacement properties of “like-kind”, while deferring the payment of federal income taxes and some state taxes on the transaction. The reason for allowing the tax deferral is that the economic gain from the transaction has not been realized in a way that generates funds to pay any tax because the taxpayer’s investment is still the same, only the form has changed (an office building exchanged for apartment building).
Since the economic gain has not been realized (the seller has not taken control of sale’s proceeds), the taxes are not yet due on the accumulated capital gains. This fact means that the 1031 exchange is tax-deferred, not tax-free. When the replacement property is sold and not exchanged, then all of the original deferred gain, plus any additional gains since the purchase of the replacement property, would be subject to tax.
Typically the exchange process is quite complex and a Qualified Intermediary can help to facilitate a successful 1031 exchange by acting as an independent agent between the parties to the exchange transaction, retaining control over the sales proceeds until suitable Like Kind property has been identified and purchased. Using the Qualified Intermediary makes the exchange much more likely to be accepted by the IRS.
We are experts in performing
- basic 1031 exchanges
- reverse 1031 exchanges
- build-to-suit 1031 exchanges
- tenant in common interest 1031 exchanges
- exotic 1031 exchanges
Contact us to find out how our skills and experience in 1031 tax-deferred exchanges can help you to preserve your capital indefinitely.