A 1031 exchange is a process through which one can sell an investment property and buy another while deferring capital gains tax. Typically, when one sells an investment for profit, they have to pay capital gains tax. Real estate is no different.
However, section 1031 of the tax code allows for an exception that when followed, permits that capital gains tax to be deferred. It’s a great benefit that sounds easy, but of course, there are rules
The quick answer is YES and it is standard practice for Invest on Main Street.
In addition to the paperwork required to execute 1031, there are specific costs associated with doing so into syndication. When investor exchanges at/above $1,000,000 into syndication, these costs are often covered by the investment.
Under the 1031 exchange code, the taxpayer has a 45-day window from the date of the sale of the previously owned property to identify the replacement property. The 45-day window is commonly referred to as an identification period. This process must be done in writing with the authentic signature of the taxpayer.
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