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      1031 Exchange Services

 

 

Riviera Title can arrange for buyers or sellers of second-home or investment property to coordinate their closings with a Qualified Intermediary who is experienced in 1031 Exchanges. Here is a synopsis of how 1031 Exchanges work, as well as a description of their benefits.

 

Thanks to IRC §1031, a properly structured exchange allows an investor to sell a property, to reinvest the proceeds in a new property and to defer all capital gain taxes. IRC §1031 (a)(1) states:

“No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.”

To understand the powerful protection an exchange offers, consider the following example:

An investor has a $200,000 capital gain and incurs a tax liability of approximately $70,000 in combined taxes (depreciation recapture, federal and state capital gain taxes) when the property is sold. Only $130,000 remains to reinvest in another property.

Assuming a 25% down payment and a 75% loan-to-value ratio, the seller would only be able to purchase a $520,000 new property.

If the same investor chose to exchange, however, he or she would be able to reinvest the entire $200,000 of equity in the purchase of $800,000 in real estate, assuming the same down payment and loan-to-value ratios.

As the above example demonstrates, exchanges protect investors from capital gain taxes as well as facilitating significant portfolio growth and increased return on investment. In order to access the full potential of these benefits, it is crucial to have a comprehensive knowledge of the exchange process and the IRC. For instance, an accurate understanding of the key term like-kind – often mistakenly thought to mean the same exact types of property – can reveal possibilities that might have been dismissed or overlooked.

 

 

The information above is provided to help with all your New Jersey and Ocean County real estate needs. Coldwell Banker Riviera Realty, Inc. specializes in Ocean County homes for sale, particularly with Barnegat homes for sale, Berkeley homes for sale, Brick homes for sale, Colts Neck homes for sale, Forked River homes for sale, Freehold homes for sale, Howell homes for sale, Jackson homes for sale, Lakewood homes for sale, Manahawkin homes for sale, Manchester homes for sale, Millstone homes for sale, Plumsted homes for sale, Point Pleasant homes for sale, Point Pleasant Beach homes for sale, Toms River homes for sale, Upper Freehold homes for sale, Wall homes for sale and more.

 

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