How to Use a 1031

What is 1031 and how can you benefit from it? The stated number refers to the Section 1031 of the Revenue Code. It states that once a property owner sells his investment property, he can use the proceeds from the sale to purchase a similar or a like-kind property. In this case, the proceeds from the sale of the first investment property shall not be subjected to capital gains taxes. However, in order to take advantage of this, one has to follow certain rules.

The like-kind property

Among the rules that the homeowner should take note of is that the like-kind property has to be identified within forty-five (45) on the closing transaction of the first property. The like-kind property does not have to be exactly the same with the previous property. In fact, the IRS has provided a very broad meaning and interpretation of it. If you have sold an unimproved land, you do not have to purchase the same property to qualify for this. Just make sure that you purchase another investment property that meets the rule of the 1031 code. (more…)