Business

1031 Exchange Business Assets

Posted on | by Andy Gustafson | Leave a Comment on 1031 Exchange Business Assets

A 1031 exchange is used to defer federal and state capital gain and recaptured depreciation taxes when selling real and personal property given like-kind property is replaced within 180 calendar days of the initial closing. The sale is grouped into asset or product classes including real property, tangible and intangible personal property. Good will is not eligible for a 1031 exchange. Should the business owner be the lessor of a thirty year or more lease, the lease is considered real property and can be replaced with a real property fee interest.

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1031 Tax Consequences of Selling Business Assets

Posted on | by Andy Gustafson | Leave a Comment on 1031 Tax Consequences of Selling Business Assets

When selling a business, consideration of the tax consequences, including a 1031 exchange is often not at the top of the list. Following a meeting with your CFO or CPA, the federal, state and recaptured depreciation tax obligation is determined and now included in the dizzying array of outcomes as is the decision of whether or not to replace the assets. By replacing all or some of the assets, the federal, state and recaptured depreciation taxes can be deferred in a 1031 exchange. Rather than paying the tax, those dollars can be used towards as an interest free loan towards acquiring replacement property. The tax obligation does not go away, but is postponed; delayed until time the newly acquired property is sold. Another 1031 exchange is possible, or should the assets be inherited, the basis is stepped up to the heirs.

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