Section 1031 Like-Kind Exchange Benefits: Defer Taxes & Reinvest More CashThe 1031 Exchange, authorized in 1921 by Section § 1031 of the Internal Revenue Code, is perhaps the most beneficial tax regulation ever implemented!
Section 1031 Like-Kind Exchange benefits are extensive! Only some U.S. taxpayers are familiar with 1031 Exchanges as they relate to real estate transactions, and fewer still are aware of the fact that “1031s” are valuable for reinvestments in equipment, vehicles, machinery, collectibles and more!
1031 Exchanges allow Exchangers (any U.S. Taxpayer) to defer normal income and capital gain taxes otherwise due on the sale of one or more properties (assets), when reinvesting in like-kind property(ies).
Primary benefits of a 1031 Exchange
- Improve cash flow and lower overhead: keep proceeds that would otherwise be due in taxes working for you, Borrow less, reinvest more!
- With an ongoing Exchange program, realize reduced tax bills and greater control of cash flow fluctuations.
- If taxes eventually become due because you sell and do not complete another Exchange, you pay the deferred tax in future dollars that are worth less than today’s dollars (inflation effect).
Overview of a Typical Section 1031 Like-Kind Exchange
Step 1: You, the Exchanger, work with a Qualified Intermediary (QI) like EquipEx when selling one or more properties (assets). Instead of paying capital gains or normal income tax on the proceeds, you defer that tax exposure, possibly indefinitely.
Step 2: The QI accepts the proceeds from the sale on your behalf and holds them in a bank account dedicated solely to your Exchange. One of the keys to a successful 1031 Tax Exchange is that you never take possession of the money – it’s received, held & disbursed by the QI.
Step 3: You initially have 45 days from the sale date to complete your Exchange by purchasing like-kind property. If additional time is needed, you can identify the replacement property that you’re considering for purchase within the 45 day period and gain another 135 days to complete the purchase. Thus, you have a total Exchange window of 180 days.
Step 4: Upon your instruction, the QI distributes funds for your replacement purchase(s). Once all funds have been used for replacement asset purchases, or the allowable Section 1031 timeframes have passed, the Exchange closes and any remaining funds are returned to you.
Step 5: Your tax professional files a form with your tax return that details the Exchange, including transfer of basis from the asset(s) relinquished to those acquired.
By successfully following Section 1031 rules, a taxable event resulting from a sale does not occur and the gain is deferred rather than realized.
Our Qualifications To Serve As Your 1031 Intermediary
At EquipEx, 1031 Exchanges are all we do, and we do them expertly! We meet or exceed all federal requirements to serve as a Qualified Intermediary:
• Certified Exchange Specialist on staff
• Exclusive use of a dedicated Qualified Escrow Account for every client (Exchanger)
• All 1031 Exchange funds held in 100% liquid accounts at U.S.-based, FDIC-insured institutions.
• Errors and Omissions insurance of $500,000, twice the required limit.
We are dedicated to the preservation of Section 1031 and to the proper, ethical facilitation of 1031 Exchanges. We handle 1031 Exchanges encompassing all types of assets: real estate, vehicles, equipment, machinery, instruments, collectibles and more.
More Money For You… Less For The IRS
For decades, real estate investors have utilized 1031 Exchanges to trade up to more expensive or lucrative properties while deferring capital gain and normal income taxes. In recent years many individuals (collectors, breeders, inventors) and business owners / decision makers in a variety of industries including transportation, construction, oil & gas, manufacturing and farming/agriculture, among others, have begun to put Section 1031 Exchanges to work for the betterment of their financial well being.
For more information on 1031 Exchanges, or to set up a free 1031 Exchange consultation to talk about how we can help you with your next sale and purchase of personal or real property, please call (720) 266-6095 in the Denver area, (855) 313-7080 nationwide, or e-mail moc.x1505970367epiuq1505970367e@ofn1505970367i1505970367.
EquipEx is located in Denver, Colorado. We handle 1031 Like-Kind Exchanges for U.S. Taxpayers located anywhere; for individuals and all types and sizes of businesses.
Click here for FAQs on 1031 Tax Exchanges for businesses.