Don't Sell Your Income or Investment Property without looking at the tax advantages of an exchange.
Protect Your Equity
When you sell your appreciated (or fully depreciated) trade, business or investment real estate, you expose your equity to capital gains taxes or ordinary income taxes. You may defer payment of those taxes if you exchange your property for other qualifying property. Few buyers have property to trade, and not all sellers have located suitable replacement property when they've decided to sell. That's where GW Land Title can assist you. We are experienced at facilitating exchanges.
The IRS has issued Regulations to assist you in structuring an exchange that qualifies for tax deferral in both simultaneous and deferred exchanges. You do not have to identify “replacement property” before you sell, but you do have to plan ahead to protect your option to defer paying those taxes. Discuss the advantages of an exchange under Section: 1031 of the Internal Revenue code with your tax and legal advisor before you close on your sale.
The IRS offers several “safe harbors” for you to choose from in structuring your exchange. The qualified intermediary safe harbor is the most common. It requires that you enter into a written agreement with us, and that you “park” the sale proceeds with us until you close on the purchase of the replacement property. Your money is invested by us during the exchange period. All interest accrues to you. This ensures compliance with the tax laws, which severely limit your right to use, control, or withdraw the sale proceeds.
Naturally, there are strict guidelines and time limits you must observe. Two of the most important ones are:
You must identify replacement property or properties within 45 days after you sell your property.
You must acquire the other property within 180 days of your sale, or prior to the tax return due date for the year in which your sale took place – whichever is earlier.
GW Land Title does not advise you how to structure your transaction; nor do we take title to either property. These limitations protect you and us. They also help you avoid additional expense.