Pay NO Capital Gains Tax At Time of Sale
The Free Cash Flow is a program designed for landlords looking to complete a 1031 tax exchange.
By partnering together - my clients are partner with a broker who is constantly connecting with other contact of landlords and investment brokers in Boston. Finding the right 1031 property to purchase can be a challenging endeavor, which is why I have broken it down into three simple steps:
Find the Right Replacement Property Type
There are three main options with the replacement property type. Some include passive investment options to reduce or eliminate real estate management headaches.
2. Timing the Relinquished Property Sale
Dates, contingency, non-refundable money and conditional sales are all important factors in timing and the success of the sale.
3. Pursuit to Contract and Closing
Steps 1 and 2 are critical to the success of pursuit to contract and closing. Knowing where you are going is critical to understand and execute the replacement property exchange.
1031 Exchange Benefits
A 1031 exchange, named after Section 1031 of the Internal Revenue Code in the United States, allows for the deferral of capital gains taxes when selling certain types of property and reinvesting the proceeds into a like-kind property. Here are some advantages of a 1031 exchange:
Tax Deferral: One of the primary benefits of a 1031 exchange is the deferral of capital gains taxes. By reinvesting the proceeds from the sale of a property into a similar property, the taxpayer can defer paying capital gains taxes until a future date.
Preservation of Capital: Since taxes are deferred, investors have the opportunity to keep more of their capital working for them. This can be particularly advantageous for those looking to leverage their capital for larger real estate investments.
Portfolio Diversification: Investors can use 1031 exchanges to diversify their real estate portfolio without incurring immediate tax consequences. This can be especially valuable for those looking to transition from one type of property to another (e.g., residential to commercial).
Increased Cash Flow: By exchanging into a property with better income potential, investors may be able to increase their cash flow. This can be achieved by acquiring a property with higher rental income or better appreciation potential.
Estate Planning Benefits: The stepped-up basis rule allows for a potentially reduced tax burden upon the death of the property owner. This can be advantageous for estate planning purposes.
Wealth Building: By continuously exchanging into larger or higher-performing properties, investors can build wealth over time without the hindrance of immediate tax obligations.
Motivation for Property Improvements: Knowing that a property will be sold and exchanged, investors may be motivated to make improvements that enhance the property's value.
It's important to note that while 1031 exchanges offer these advantages, they also involve complex rules and regulations. It's advisable for investors to work closely with the right broker, qualified tax and legal professionals to ensure compliance with the IRS regulations and to make informed decisions based on their specific financial situations and goals.
Maximize your profits, diversify your portfolio, and preserve your capital gains. Contact me today to explore the benefits of a 1031 exchange and take the next step toward building your real estate legacy!