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One of the most popular "tax deferring" strategies for real estate owners who are selling one property and acquiring another is the use of Section 1031 of the Internal Revenue Code. It is an effective way to defer paying income tax on capital gain generated by the sale of a property when you intend to reinvest the proceeds in a similar, "like-kind" property. Almost any kind of real property is considered "like-kind" with any other real property.
A recently enacted law closes what was considered a loophole in the Section 1031 rules. In some cases, owners of investment real estate have used the 1031 Exchange to swap their investment property for real estate that could be readily converted to an owner-occupied residential property. After the exchange, they made the property into their principal residence, lived in it for a couple of years, then sold it. Now the American Job Creation Act of 2004 has ruled that properties converted from a 1031 exchange property into a residence must be held and used as a principal residence for at least five years to qualify for the tax exemption. Otherwise, the basic tax-deferring benefits of 1031 exchanges remain the same.
Consult your tax advisor for more detailed information.
Joanna's Team Keller Williams 1990 N. McCulloch BLVD Suite 109 Lake Havasu City, AZ 86403 928-505-2777 Fax: 928-505-2442 Joanna@JoannaDidItAgain.com
Joanna's Real Estate Team at Keller Williams treats you like family. What our family is mostly concerned about in this shifting market is the values of homes in their area.
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