Bank owned REO 1031 eligible property fronting Highway 98 East with some frontage on Highway 183 in Defuniak Springs, Florida for $175,000. Approximately 29.64 acres of mostly wooded property is available at price ready to sell. Bank wants to sell this property!
Andy Gustafson
1031 Exchange Rules Virginia
Section 1031 of the Internal Revenue Code allows taxpayers to enter into an exchange of property instead of a traditional sale in order to defer the payment of capital gains taxes that would otherwise be due. Because of the various and complex rules that must be followed for a transaction to qualify as a Section 1031 Exchange, a Qualified Intermediary, or QI, is required to facilitate the transaction. In short, a QI facilitates the exchange through the use of an Exchange Agreement and Assignments of the relinquished and replacement property Purchase and Sale Agreements entered into by the QI and the taxpayer. Part of the QI’s role is to hold, and ultimately transfer between the parties, funds that are used in the transaction. Given the fiduciary role of a QI, individual states have enacted laws specifically aimed at Qualified Intermediaries in an attempt to prevent misappropriation of funds. In Virginia, § 55-525.1 et seq. addresses the duties and responsibilities of a QI, who is referred to as an Exchange Facilitator in Virginia.
Multi-Family 1031 Eligible Properties in Warrensburg, MO
1031 eligible multi-family properties are available in Warrensburg, Missouri, located 64 miles from Kansas City and 218 miles from St. Louis. Whiteman Air Force Base and University of Central Missouri are the leading employers.
1031 Tax Exchange
As the precursor to the modern day 1031 tax exchange, exchanging one property for another represents a common activity dating back to when mankind first began trading including the last three hundred years in the US, where land traded for land, and the horse for horse trades of old. If a farmer traded land with a better yield for a farm or land of lessor value, the farmer would ask for something of value to make up the difference. The generally accepted concept was that the farmer’s economic position didn’t change. The theory is the basis for the 1031 tax exchange, yet with the introduction of income taxes in the early twentieth century, any benefit received beyond the real or personal property received was considered boot, or taxable.
Selling Farmland Tax Consequences
When selling land, whether farmland, timberland or raw land, federal and state taxes are triggered and due in the year following the sale. The sale proceeds are reported on the taxpayer’s federal and state tax return. If the property sold for a value greater than the purchase price, then a capital gains tax is due. The capital gains tax is currently 15 percent given the property has been owned for at least a year and a day and the taxpayer is in the 25 percent tax bracket and above. If owned for a shorter period, then the short term rate or the ordinary income tax, is imposed. Recaptured depreciation is not due given land cannot be depreciated.
FIRPTA and 1031 Exchange Analysis
When a taxpayer realizes a gain on the sale of property, the taxpayer typically owes capital gains taxes on the amount realized. One method often utilized by taxpayers to avoid the payment of capital gains taxes is to enter into a Section 1031 Exchange instead of a traditional sale. When a transaction qualified for Section 1031 treatment the capital gains taxes that would otherwise be due are deferred. When a non-resident alien, or foreign, investor is involved the rules become a bit more complicated.