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Orlando Fl 1031 Exchange

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Fri, May 17, 2019 at 5:25AM

An Orlando Fl 1031 Like Kind Exchange is done to defer taxes on the selling of your property. A 1031 Exchange is often referred to as a Starker Exchange because unless you find a property you want before you sell yours most likely you perform a Starker Exchange. According to Forbes Magazine the vast majority of exchanges are Starker Exchanges which are three party or also known as delayed exchanges. These are referred to as "Starker" exchanges after the legal case which allows them. As of 2017 most Like Kind exchanges are now limited to real property so says the IRS.

Construction or Improvement Exchanges

The Improvement or Construction Exchange is an exchange which allows the exchanger to spend any "exchange"equity acquired improving the replacement property. However all of the improvements must be performed and the transaction take place before the 180 day window closes. Normally these improvements are completed while the replacement property is in the hands of the Qualified Intermediary.

We are not accountants. Make your decisions based on your knowledge and professional legal and financial adviser. Some of the important things to consider are below if you are wishing to defer all of the gain acquired from the sale of your relinquished property.

  1. Remember that 180 day window? All of your equity must be used as down payment or improvements by the end of it.
  2. No trickery, you must receive "substantially" the same property which you originally chose. If you are going to push the envelope get legal counsel.
  3. Any changes must be in place before the exchanger receives title and the replacement property must be of equal or greater value to the relinquished property.

Delayed Exchange "Starker Exchange"

The Delayed Exchange is the most common exchange. This exchange involves selling the relinquished property, finding a new property within 45 days and closing on the new property within 180 days. Obviously there are numerous benefits to performing these types of 1031 exchanges which is why they are now so popular. The exchanger must sell the original property and have a Qualified Intermediary hold the taxable proceeds until the successful purchase of the replacement property. A Qualified intermediary is a "Safe Harbor" and great care must be taken selecting one.

Reverse Exchange

Buy first, sell later aka a "Forward Exchange". If you have a great property in a very marketable location this may be a good choice for you however they are more complicated than they appear at first glance. Banks do not like lending money on reverse exchanges possibly due to the failure rate. Consider this type of exchange if you are prepared to go "all cash".

  1. After acquiring the new property you have 45 days to decide which property you will be keeping and which property will become the "relinquished property".
  2. Consult an attorney for legal advise. As of this writing you must still complete this entire process within 180 days.

Simultaneous Exchange

Same day close. A Realtors dream and basically what this type of exchange represents. The downside is if anything happens to keep the properties from exchanging on the same day then taxes will apply. As a Realtor and having decades of experience in Real Estate I can tell you "stuff happens". However experience and being proactive can prevent much of it. Here are the ways that this exchange is normally carried out.

  1. Swapping Deeds where the two parties schedule a time to exchange deeds. Equity cannot be used to improve the new property because it is deeded to you. Contact your accountant or attorney with questions and concerns.
  2. An accommodating party can be used to facilitate the transaction. This is also known as a "three party exchange".
  3. Have a Qualified Intermediary structure and handle the entire exchange simultaneously.

Like Kind Exchange Terms

Cash Boot- The fair market value or money received in the exchange.

Mortgage Boot- additional mortgage amount left over from the first property that is not replaced by the acquisition of the second.

Reduced Basis,200% Rule and the 95% Rule- Ask your accountant or attorney. These matter.

If you are considering an exchange contact us. We would love to assist you. Central Florida is a large place and a great place to have investment properties. Hopefully very soon you will be looking back on a successful Orlando Fl 1031 Like Kind exchange. 

 

 
 
 

 

Orlando Fl 1031 Like Kind Exchange


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