Under the normal Internal Revenue Service, or IRS, code regulations you are required to pay capital gains taxes when you sell a property and realize a profit. Although the rate at which capital gains are taxed fluctuates, it is typically rather high given federal, possibly state capital gains and recaptured depreciation taxes. This tax can quickly eat away at the gain you realized on the sale of an investment. One option that allows you to defer the payment of capital gains taxes is to enter into a Section 1031 exchange instead of a traditional sale. In some limited circumstances, converting a rental to a primary residence after the exchange has been completed may be allowed eliminating the majority of the gain via the $500,000/$250,000 exclusion.
Fantastic location for this 1031 eligible four unit replacement property built in 2007. Each unit features 3 bedrooms, 2 bathrooms with washer and dryer located in beautiful Branson, Missouri. All units are rented providing cash flow to owner.
Internal Revenue Code Section 1031 has many 1031 exchange rules that start with the code itself: “No gain or loss is recognized when property held for productive use in a trade, business or investment is exchanged for property held for productive use in a trade, business or investment.” A 1031 rule is to hold the property for the proper intent – or not for predominant personal use. Without proper intent, the 1031 exchange is not eligible for consideration.