Use These 1031 Rules As A Way Of Being Successful In The Real Estate Business
If an investor wants to be successful with their trade, the one tool that they can use is the 1031 tax-deferment policy. Here are some of the things that you need to know about the 1031 rules.
One of the 1031 rules that you should note is the same taxpayer. Note that this rule states that the tax return and the one that appears on the title of the property that is being sold should be that of the person who is buying. The person who is purchasing any farm that sells is the one to fill in the tax return that appears on the title as well as the capital. In case you are running a company that is owned by one person, then any property that you have needs to be under your name.
You also need to look into the property identification. When the posed closing date arrives, it is paramount for any property owners that are doing the exchange to be able to identify the accommodate or the closing entity of the address of the potential properties that will be used in the trade. During this time frame, one should also have a list of the properties that they are planning to buy or sell. There is the use of the three property rules that allows you to look for three features regardless of the value. The two hundred percent rules allows one to be able to identify four or more features as long as they do not exceed 200% of the property that is being sold. The other rule that you should understand is that 95% rule where if the property exceeded 200% then 95% of the wealth should be bought.
It is also best to understand the replacement rule. When 180 days pass after the close of the first property the it is a must to ensure that the property has been purchased.
The value of the property that is being sold needs to be lesser or equal to the property that is being replaced if you are to defer 100% of the tax. In this case the Exchangor is the one who needs to pay the tax on the difference. When you are looking into the debt and equity, you have to understand that this needs to be equal or greater than the debt and the equity of the property that has been relinquished.
Though with the 1031 rule there are no holdups, the revenue company will look into the property to determine if it was acquired immediately before the exchange. The company has to learn the reason that the property was bought. It could be that it used to fix the flip or hold productive use of investment. The shorter the period, the more substantial the facts needs be.