Like-Kind Exchanges: Defer Part (Or All) Of Your Gains From Investments Sales

Have you been looking to sell your investments? Are you aware that you could defer part, or all, of the gain by exchanging your investment with a similar one?

Like-Kind Exchanges

Like-Kind Exchange

The Internal Revenue Service (IRS) provides a benefit, known as Section 1031 – Like-kind Exchanges, for taxpayers that reinvest proceeds from selling certain kinds of investment property:

By exchanging your real property or personal property -used in either a trade or business- with a similar asset, you will be able to defer the gain from the exchange.

It is important to understand that not all property qualifies for like-kind exchanges and that, depending on the type of transaction, you might have to pay taxes, as some gains will not be deferred. There are also very stringent deadlines that the IRS imposes in order to qualify for this benefit.

Usually, due to the strict time frame and the complexity of the transaction, the IRS requires the taxpayers to select a qualified intermediary acting on their behalf throughout the process. The reason is to avoid premature cash exchanges and to complete all of the necessary documentation to avoid the transaction from being disqualified.

Please contact us for further details or advice on this matter or other tax issues you might have. It is important to realize that every transaction is unique and might expose the taxpayer to varying tax consequences.

Photo credit: andrew c mace via Visualhunt / CC BY-NC-SA

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