Beginning in 2013, Internal Revenue Code (IRC) Section 1031 tax deferred exchanges will defer the recently elevated federal capital gains tax for taxpayers with a modified adjusted gross income (MAGI) of $200,000 for individuals and $250,000 for married filing jointly. The aggregate tax rate will increase from 15 percent to 18.8 percent for individual and married taxpayers with a MAGI of $200,000 and $250,000 respectively. For individual and married taxpayers with a MAGI of $400,001 and $450,001, the federal capital gains rate is 23.8 percent.
Andy Gustafson
Hold Time Prior to Converting Rental to Primary Residence
Rental properties acquired in a 1031 exchange can be converted to the taxpayer’s primary residence. This is a popular strategy that allows taxpayers to live in their vacation property. The question is how long does the property need to be held as a rental before conversion? The answer depends on the circumstances.
1031 Deferred Improvement Exchange in Florida
“All in all, the process was very simple, payments to contractors was very quick and painless. I am pretty happy with being able to use the proceeds to make the improvements. I would recommend Atlas 1031 and the 1031 deferred improvement exchange.”
1031 Exchanges with Short Sales and Foreclosures
Taxpayers engaged in a 1031 exchange will often include short sale and foreclosure properties in their mix of potential replacement properties. A 1031 exchange allows the deferral of federal and state capital gains and recaptured depreciation taxes when a property of equal or greater value is acquired. The tax deferral is an indefinite postponement of the tax triggered or due when the replacement property is sold, unless another 1031 exchange is initiated.
Three Initial Steps to a 1031 Exchange
Taxpayers who wish to initiate a tax deferral may ask “What are the initial 1031 exchange steps?” in an effort to avoid any mistakes. As a Qualified Intermediary (QI) of 1031 exchanges, I appreciate the question because it shows the taxpayer is taking ownership. With ownership comes better questions and clarity, resulting in fewer if any misinterpretations.
Healthcare Property as 1031 Replacement
This 1031 eligible commercial property located in Denton, Texas is available for the 1031 client looking to acquire healthcare replacement property. Construction of the 5,706 square foot building was completed in December, 2011. The triple net lease is occupied by Cardiovascular Specialists under a ten year lease.