In the realm of real estate investment, multifamily properties and Delaware Statutory Trusts (DSTs) are two popular avenues for investors looking to diversify their portfolios and maximize returns. These investment options offer unique advantages, particularly for investors participating in a 1031 exchange.
Multifamily properties, such as apartment complexes or townhomes, present investors with the opportunity to generate steady rental income while benefiting from potential appreciation in property value over time. With a 1031 exchange, investors can defer capital gains taxes by reinvesting proceeds from the sale of one multifamily property into another of equal or greater value, thus preserving wealth and facilitating portfolio growth.
On the other hand, DSTs offer investors a passive ownership structure in large-scale commercial properties, such as office buildings, retail centers, or industrial complexes. By pooling funds with other investors, individuals can access institutional-quality assets without the responsibilities of active management. Through a 1031 exchange, investors can transition from direct ownership of multifamily properties to fractional ownership in DSTs, providing potential tax benefits and access to diversified income streams.
Both multifamily properties and DSTs offer unique advantages for investors navigating the complexities of a 1031 exchange. Whether seeking steady rental income, long-term appreciation, or diversification across asset classes, these investment options can play a pivotal role in achieving financial goals and building wealth for the future.
Understanding the Four Basic Rules of 1031 Exchange
The 1031 exchange, often hailed as a powerful tool for real estate investors, offers significant tax advantages. However, navigating its intricacies requires a solid understanding of the fundamental rules. Let's delve into the four basic rules that govern the 1031 exchange process:
1. Like-Kind Property: The cornerstone of a 1031 exchange is the requirement that the property being sold and the property being acquired must be of like-kind. This term is broadly interpreted within the realm of real estate, allowing for flexibility in exchanging different types of investment properties.
2. Qualified Intermediary: To execute a 1031 exchange, investors must engage the services of a qualified intermediary (QI). The QI acts as an intermediary facilitator, holding the proceeds from the sale of the relinquished property and subsequently using them to acquire the replacement property. Using a QI ensures that the investor does not have constructive receipt of the funds, a crucial requirement for the exchange to qualify for tax deferral.
3. Identification Period: Upon selling the relinquished property, investors enter into a strict timeline for identifying potential replacement properties. This identification period typically spans 45 days from the sale of the relinquished property. During this time, investors must identify potential replacement properties in writing and adhere to specific identification rules outlined in the tax code.
4. 180-Day Exchange Period: Following the identification period, investors have 180 days in total to complete the exchange. This period encompasses both the 45-day identification window and an additional 135 days for closing on the replacement property. It's imperative to adhere to this timeline to ensure the successful completion of the exchange and eligibility for tax deferral.
Understanding the four basic rules of a 1031 exchange lays a solid foundation for executing a successful exchange transaction. By adhering to these rules and seeking guidance from experienced professionals, investors can maximize the tax benefits and enhance their real estate investment strategies.
Navigating the 1031 Exchange: Understanding the Three-Property Rule
When it comes to maximizing the benefits of a 1031 exchange, investors often seek strategies that allow for greater flexibility and potential for growth. One such strategy is the Three-Property Rule, a provision within the 1031 exchange framework that offers investors the opportunity to diversify their portfolios while deferring capital gains taxes.
The Three-Property Rule allows investors to identify up to three replacement properties as potential candidates for their exchange. This means that instead of being limited to a single replacement property, investors have the option to select from a broader range of investment opportunities.
One of the key advantages of the Three-Property Rule is its flexibility. By providing the option to identify multiple replacement properties, investors can adapt their strategies to better suit their investment goals and objectives. Whether they're looking to diversify their holdings across different asset classes or focus on specific geographic regions, the Three-Property Rule offers investors the freedom to tailor their exchanges to their individual preferences.
Additionally, the Three-Property Rule can be particularly beneficial in competitive real estate markets where finding suitable replacement properties may be challenging. By allowing investors to identify multiple properties, the rule increases the likelihood of successfully completing a 1031 exchange, even in situations where inventory may be limited.
However, it's important for investors to understand the rules and requirements associated with the Three-Property Rule to ensure compliance with IRS regulations. For example, investors must adhere to strict timelines for identifying and acquiring replacement properties, with deadlines typically falling within 45 days and 180 days, respectively, from the sale of the relinquished property.
Furthermore, investors should carefully consider the potential financial implications of each replacement property before making their selections. Conducting thorough due diligence and consulting with tax and financial advisors can help investors make informed decisions that align with their investment objectives and long-term financial goals.
In conclusion, the Three-Property Rule offers investors a valuable opportunity to diversify their portfolios and defer capital gains taxes through the 1031 exchange process. By understanding the rules and requirements associated with this provision, investors can leverage the flexibility of the Three-Property Rule to optimize their investment strategies and achieve greater success in their real estate endeavors.
Tax-Smart Investing: Leveraging 1031 Exchanges for Real Estate Success
Are you a real estate owner looking to maximize your investments? If so, you've likely heard of the powerful tool known as a 1031 exchange. This strategic maneuver can provide substantial benefits for savvy investors, allowing them to defer capital gains taxes and unlock new opportunities for growth. In this blog post, we'll explore how real estate owners can leverage the advantages of a 1031 exchange to enhance their investment portfolios.
Deferring Capital Gains Taxes: One of the most significant advantages of a 1031 exchange is the ability to defer capital gains taxes on the sale of investment property. Instead of paying taxes immediately upon the sale, investors can reinvest their proceeds into a like-kind property and defer the tax liability until a future date. This tax deferral can free up capital for additional investments and provide a powerful boost to long-term wealth accumulation.
Facilitating Portfolio Diversification: 1031 exchanges offer real estate owners the opportunity to diversify their investment portfolios without incurring immediate tax consequences. By exchanging one property for another of equal or greater value, investors can reallocate their capital into different asset classes or geographic locations, reducing risk and enhancing overall portfolio resilience.
Unlocking Equity and Cash Flow: Another benefit of a 1031 exchange is the ability to unlock equity and improve cash flow by exchanging underperforming properties for more lucrative investments. By upgrading to properties with higher rental income potential or better growth prospects, investors can enhance their long-term financial returns and position themselves for greater success in the real estate market.
Preserving Wealth for Future Generations: In addition to providing immediate tax benefits, 1031 exchanges can also play a vital role in estate planning and wealth preservation. By deferring capital gains taxes, investors can preserve more of their wealth to pass on to future generations, ensuring a lasting legacy for their families.
In conclusion, real estate owners stand to gain a multitude of benefits by utilizing 1031 exchanges as part of their investment strategy. From deferring capital gains taxes to facilitating portfolio diversification and unlocking equity, these powerful tools offer investors a wide range of opportunities for growth and success. By working with experienced professionals and carefully evaluating their investment objectives, real estate owners can harness the full potential of 1031 exchanges to achieve their financial goals.
Maximizing Real Estate Returns in NYC: The Benefits of 1031 Exchanges
Investing in real estate in New York City can be an excellent way to build wealth and generate passive income. However, the high property values and significant taxes can limit the potential for profits. One strategy that can help investors maximize their returns is a 1031 exchange. In this blog post, we'll explore the benefits of 1031 exchanges in NYC.
1. Deferring Taxes
One of the most significant benefits of a 1031 exchange is the ability to defer taxes on the gains from the sale of a property. In NYC, where property values can be extremely high, taxes can also be significant. By using a 1031 exchange, investors can reinvest the proceeds from the sale of a property into a new property, defer taxes on the gains, and potentially increase their overall returns.
2. Maximizing Profits
Investors who use a 1031 exchange can also maximize their profits by avoiding paying taxes on the gains from the sale of a property. This means that they can reinvest more money into a new property, potentially leading to higher returns. Additionally, investors can choose to reinvest in a property with greater potential for appreciation or higher rental income, leading to long-term financial benefits.
3. Diversifying Investment Portfolio
Another benefit of a 1031 exchange is the ability to diversify an investment portfolio. By selling a property and reinvesting the proceeds into a new property in a different location or type of property, investors can reduce their risk and spread their investments across different areas. This can help protect their investments from local market fluctuations or downturns in specific industries.
4. Avoiding Rent Control Regulations
Rent control regulations in NYC can be challenging for real estate investors to navigate. By using a 1031 exchange, investors can sell a property that is subject to rent control regulations and reinvest in a property that is not subject to the same regulations. This can allow them to increase rental income and avoid the headaches of dealing with rent control regulations.
5. Conclusion
Investing in real estate in NYC can be lucrative, but also challenging due to high property values and significant taxes. By using a 1031 exchange, investors can defer taxes, maximize profits, diversify their investment portfolio, and avoid rent control regulations. However, it's essential to work with a qualified intermediary and ensure that the exchange meets all requirements to avoid any potential tax liabilities. Overall, a 1031 exchange can be a powerful tool for real estate investors in NYC looking to maximize their returns and build long-term wealth.
Understanding the Recent Banking Issue in the United States and FDIC's Role in Protecting Depositors
The recent banking issue in the United States has caused widespread concern among many Americans. Reports of people withdrawing their money from banks and concerns about the safety of deposits have raised questions about the stability of the banking system. In response to these concerns, the Federal Deposit Insurance Corporation (FDIC) has issued statements to reassure the public and explain the measures in place to protect depositors.
The FDIC was created in 1933 in response to the Great Depression as a way to provide deposit insurance to protect bank customers in the event of a bank failure. The FDIC insures deposits up to $250,000 per depositor per insured bank. This means that if a bank fails, the FDIC will cover the deposit up to $250,000. Since the FDIC's creation, no depositor has lost a single penny of insured deposits as a result of a failure of an FDIC-insured bank.
Despite the assurances from the FDIC, many people remain concerned about the safety of their deposits. However, experts recommend that the best course of action is to keep calm and avoid panic. The FDIC recommends that depositors keep their money in FDIC-insured banks and credit unions and avoid keeping large sums of cash at home. In addition, it's important to remember that bank failures are relatively rare and that the banking system is heavily regulated to ensure stability and safety.
Contact us to learn more about how your deposits are safe and insured with our heavily secured 1031 Exchange accounts.
Why Real Estate Investors in California Should Consider a 1031 Exchange
Real estate investors in California looking to sell their investment properties and reinvest the proceeds can benefit greatly from using a 1031 exchange. California is a popular market for real estate investing, with its booming economy, desirable location, and attractive properties. But with high capital gains taxes, selling an investment property in California can also result in a significant tax burden. That's where a 1031 exchange can come in handy.
One of the biggest benefits of a 1031 exchange in California is the potential to defer paying state and federal capital gains taxes. By reinvesting the proceeds from the sale of an investment property into a like-kind property, investors can defer paying taxes on their capital gains and keep more money for their next investment. This can be especially advantageous in California, where capital gains taxes can be as high as 13.3%.
Another benefit of using a 1031 exchange in California is the ability to leverage the exchange to acquire more valuable properties. By deferring taxes and reinvesting the full amount of the sale proceeds into a new property, investors can potentially purchase a more valuable property or multiple properties, increasing their potential returns and diversifying their portfolio.
Additionally, California has a variety of attractive real estate markets, from San Francisco to Los Angeles to San Diego. A 1031 exchange can allow investors to take advantage of these markets and invest in properties that have the potential for high appreciation and rental income.
In conclusion, real estate investors in California should consider a 1031 exchange to maximize their profits and minimize their tax burden. By deferring taxes and reinvesting the full amount of the sale proceeds into a new property, investors can potentially acquire more valuable properties and take advantage of California's desirable real estate markets. It's important to consult with a qualified intermediary and tax professional to ensure compliance with all 1031 exchange rules and regulations.
Maximizing Real Estate Profits: How 1031 Exchanges Benefit First-Time Investors
Investing in real estate can be an exciting prospect for first-time investors, but it can also be daunting. One of the challenges of real estate investing is finding ways to mitigate taxes and maximize profits. Fortunately, there is a tool that can help first-time investors do just that: the 1031 exchange.
A 1031 exchange, also known as a like-kind exchange, is a tax-deferment strategy that allows an investor to sell one property and use the proceeds to purchase another property of equal or greater value, without paying capital gains taxes on the sale. This means that the investor can keep more money in their pocket and reinvest it into a new property.
Here are some of the ways that 1031 exchanges can benefit first-time investors:
1. Increased purchasing power
With a 1031 exchange, investors can leverage their existing equity to purchase a larger or more valuable property. This can increase their potential for cash flow and appreciation.
For example, let's say an investor owns a rental property that has appreciated in value over the years. They decide to sell the property and use the proceeds to purchase a larger multi-unit property. With a 1031 exchange, they can defer the capital gains taxes on the sale and use the full amount of the sale proceeds to purchase the new property, giving them greater purchasing power.
2. Tax deferral
The most significant benefit of a 1031 exchange is the ability to defer taxes on the sale of the original property. This can allow investors to keep more money in their pocket and reinvest it into a new property, rather than paying a large portion of it to the government in taxes.
By deferring taxes, investors can take advantage of the time value of money, which can help them build wealth over time. They can use the funds that would have gone towards taxes to invest in additional properties or make improvements to their existing properties.
3. Diversification
Another benefit of a 1031 exchange is that it allows investors to diversify their real estate holdings. By exchanging one property for another, they can move into a different market, property type, or asset class, which can help reduce risk and increase the potential for long-term returns.
For example, an investor who owns a single-family rental property in one market could exchange it for a multi-unit apartment complex in a different market. This would diversify their holdings and potentially provide greater cash flow and appreciation potential.
4. Estate planning
A 1031 exchange can also be a valuable estate planning tool. By deferring taxes on the sale of a property, investors can pass the property onto their heirs with a stepped-up basis, which can reduce or eliminate capital gains taxes for the heirs.
For example, if an investor purchases a property for $100,000 and it appreciates to $500,000 at the time of their death, their heirs would receive a stepped-up basis of $500,000. If the heirs sold the property for $500,000, they would not owe any capital gains taxes.
In conclusion, a 1031 exchange can be a valuable tool for first-time real estate investors. By deferring taxes, increasing purchasing power, diversifying holdings, and providing estate planning benefits, a 1031 exchange can help investors maximize profits and build long-term wealth. It's important to work with a qualified intermediary and consult with a tax professional to ensure that the exchange is structured correctly and in compliance with IRS regulations.
1031 Exchange vs. Opportunity Zone: Understanding the Differences for Real Estate Investors
Real estate investors looking to maximize their tax savings and investments have two popular options: 1031 exchanges and opportunity zones. While both strategies offer benefits for investors, they have different requirements and advantages.
A 1031 exchange allows investors to defer paying capital gains taxes on the sale of an investment property by reinvesting the proceeds into a like-kind property within a specific time frame. This allows investors to reinvest the full amount of their proceeds into a new property, giving them more buying power and the potential for greater long-term gains. However, 1031 exchanges require strict adherence to specific timelines and rules, including a 45-day identification period and a 180-day exchange period.
On the other hand, opportunity zones provide investors with tax incentives for investing in designated low-income areas. By investing capital gains into a qualified opportunity fund, investors can defer paying taxes on their gains until 2026 and potentially reduce their tax liability on those gains. Furthermore, if the investment is held for at least ten years, any gains from the investment can be tax-free. However, opportunity zones require investing in specific areas and meeting other requirements, including using a qualified opportunity fund.
Overall, both 1031 exchanges and opportunity zones offer tax benefits and investment opportunities for real estate investors. The choice between the two depends on the investor's goals, timelines, and investment strategies. It's important to consult with a qualified intermediary and tax professional to determine which option is best for your specific situation.
In conclusion, understanding the differences between 1031 exchanges and opportunity zones can help real estate investors make informed decisions about their investments and maximize their tax savings. Be sure to do your research and seek professional advice before making any investment decisions.
"5 Common Mistakes to Avoid with 1031 Exchanges: A Guide for Investors"
"5 Common Mistakes to Avoid with 1031 Exchanges: A Guide for Investors"
A 1031 exchange is a powerful tool for deferring capital gains taxes on investment properties, but it can be a complex process that requires careful planning and execution. Unfortunately, many people make common mistakes that can derail their 1031 exchange and lead to costly consequences. In this post, we'll take a look at five common mistakes people make with 1031 exchanges and how to avoid them.
Failing to meet deadlines: One of the most common mistakes people make with 1031 exchanges is failing to meet the strict deadlines outlined by the IRS. To qualify for a 1031 exchange, you must identify a replacement property within 45 days of selling your original property and complete the exchange within 180 days. Missing these deadlines can result in disqualification and the loss of potential tax benefits.
Not selecting the right replacement property: Another common mistake is selecting a replacement property that doesn't meet the IRS requirements for a 1031 exchange. For example, you must purchase a property that is of equal or greater value than the property you sold, and you must use the property for business or investment purposes. Failing to select the right replacement property can also lead to disqualification and the loss of potential tax benefits.
Forgetting to account for all expenses: Another mistake people make with 1031 exchanges is failing to account for all expenses associated with the transaction. This can include closing costs, transfer fees, and other expenses that can eat into the tax benefits of the exchange. To avoid this mistake, it's important to work with a qualified intermediary who can help you account for all expenses and ensure that you're maximizing your tax savings.
Using funds from the exchange for personal use: Another common mistake is using funds from the exchange for personal use. The IRS requires that all funds from the sale of the original property be held by a qualified intermediary until they are used to purchase the replacement property. Using these funds for personal use can result in disqualification and the loss of potential tax benefits.
Failing to consult with a qualified professional: Perhaps the biggest mistake people make with 1031 exchanges is failing to consult with a qualified professional. The rules and regulations surrounding 1031 exchanges can be complex, and even small mistakes can result in disqualification and the loss of potential tax benefits. By working with a qualified intermediary and consulting with a tax professional, you can ensure that your 1031 exchange is executed properly and that you're maximizing your tax savings.
By avoiding these common mistakes and working with qualified professionals, you can ensure that your 1031 exchange is successful and that you're maximizing your tax benefits.
What are Direct and Indirect Property Investments?
Understanding Reverse 1031 Exchanges
What is a Reverse 1031 Exchange?
You’ve heard of the 1031 exchange (if not, now would be a great time to check out our blog post on this!). But what are reverse 1031 exchanges and how do they work?
To recap, 1031 Exchanges allow investors to swap an investment or business property for like-kind property of equal or greater value while deferring capital gains taxes. If your property meets the requirements, you can exchange it for another investment or property and have limited or no tax due at the time of the swap.
What Exactly is a Reverse Exchange?
A reverse exchange is a type of property exchange wherein the replacement property is acquired first, and then the current property is traded away. A reverse exchange was created to help buyers purchase a new property before being forced to trade in or sell a current property. This may allow the seller to hold a current property until its market value increases, thereby also increasing their own timing to sell for maximized profit.
The Reverse Exchange is the opposite of the Delayed Exchange. Where the Delayed Exchange requires the Exchangor to relinquish property before he acquires property, the Reverse Exchange allows the Exchangor to acquire property first and relinquish property second. In other words, the Reverse Exchange allows an investor to acquire a new property today, when an excellent investment may be available, and sell other property later when a better price might be obtained.
The Reverse Exchange greatly expands the ability of the investor to take advantage of changes in the marketplace and to improve his or her investment position.
Standard like-kind exchange rules usually do not apply to reverse exchanges. Such rules typically allow a property investor to discontinue payment of capital gains taxes on a property they have sold so long as the profit from that sale is applied toward the purchase of a “like-kind” property. The IRS has created a set of safe-harbor rules that allow for like-kind treatment, as long as either the current or new property is held in a qualified exchange accommodation arrangement, or QEAA. Additionally, the investor cannot use property already owned as a replacement for the relinquished property.
Reverse exchanges apply only to Section 1031 property, so it is also referred to as a 1031 exchange. Section 1031 properties are properties that businesses or those with qualifying organizations exchange in order and defer paying taxes on any profit gained from their sale. However, it’s not as simple as an individual taxpayer buying one property, selling it, then using the profits to buy another property. Instead, there must be a set standard of exchange as well as the presence of a facilitator who is used to set up the process. Section 1245 or 1250 properties are ineligible for this type of transaction.
Reverse 1031 Exchange Requirements
Generally, there is a maximum holding period that applies to properties in reverse exchanges, typically averaging around 180 days. The opposite of a reverse exchange is the delayed or deferred exchange, in which an exchanger must first relinquish owned property by trading or selling before acquiring a new property.
Reverse exchanges are often used in cases where a property investor must close on the sale of a new property before being able to sell their current property. Cases such as these include the unexpected discovery of a desirable new property that must be purchased within a short amount of time or situations in which the sale of a currently-held property falls through unexpectedly, thus leaving a reverse exchange as a potential fix that allows the investor to continue the purchase of a new property.
Reverse 1031 Exchange Terms to Know
Qualified Exchange Accommodation Arrangement (QEAA)
A qualified exchange accommodation arrangement or QEAA is the exchange agreement between you, the taxpayer, and the EAT. The QEAA is meant to be a safeguard to hold properties during an exchange as a shelter from taxes.
Under the IRS’ Revenue Procedure 2000-37, if an investor meets the requirements of a QEAA, they won’t be taxed upon exchange of the properties. There’s been some grey area regarding which assets qualify under this revenue procedure. Near the end of 2019, the IRS finally clarified that rental real estate qualified for these safe harbor benefits.
Before executing a QEAA, it’s wise to already know which property you’re going to buy and how it will be funded (cash, financing, etc.).
Exchange Accommodation Titleholder (EAT)
The taxpayer and EAT must both agree to and follow the QEAA. Because investors are not allowed to hold the title of the property they’re relinquishing for the duration of the exchange, the EAT acts as a holding cell.
Think of the EAT as an LLC. Essentially, the EAT buys the property you’re getting rid of, at fair market value, and becomes the titleholder for tax purposes. When your rental property sells, the money from the sale is used to purchase your replacement property.
Once you’ve purchased a replacement investment property and have a buyer under contract for your property–next you will need a Qualified Intermediary.
Qualified Intermediary (QI)
The Qualified Intermediary acts as sort of a liaison between buyers, sellers and the IRS. The money from the sale of the property you turned over is transferred to the QI and used to “buy” the title from the EAT. The main responsibility of a QI is to transfer the titles of both properties from the EAT to their respective owners, which then completes the exchange.
The QI ensures that the reverse 1031 exchange process was done correctly and qualifies the investor for tax advantages.
Types of Reverse 1031 Exchanges
Exchange Last
The most common type of reverse exchange is an exchange last reverse. During an exchange last reverse, the EAT holds the title of the “replacement” or new property until your “relinquished” property is sold.
The exchange last reverse gives investors more flexibility. On the other hand, it can present issues when working with certain lenders because their reverse 1031 exchange policies tend to vary. Call around to find out which lenders will work with the EAT keeping the property title during the exchange process.
Exchange First
For an exchange first reverse, investors buy a new investment property directly through a lender and simultaneously turn the title over to the EAT. However, most lenders require you to reinvest all the equity from the property you sold into the replacement property.
The problem is, money must be put toward the new investment property in order for the sale to become final. This means an investor will have to have a lot of cash-on-hand.
Ready to Explore Your Options?
As your qualified intermediary, Growth 1031 is experienced and fully equipped to facilitate your reverse 1031 exchanges. We walk you through all stages of the exchange and guide you through every step. Per California law, our Exchange Accommodators are also licensed and bonded for your peace of mind. Whether you want to learn more about 1031 exchanges or are ready to get into the exchange process, we’d love to hear from you! Contact Growth 1031 for a consultation today.
Disclaimer: Growth 1031, Inc. is a qualified intermediary that specializes in facilitating 1031 exchanges. Growth 1031, Inc.is not a law-firm and does not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
Benefits of Opportunity Zones and 1031 Exchanges
In this article we take a look at what Qualified Opportunity Zones are and the benefits these bring to both investors and communities.
What are Opportunity Zones?
An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state, and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service. Opportunity zones then help the economy grow by creating jobs in these distressed communities, while investors receive tax benefits.
The 2017 Tax Cuts and Jobs Act was signed into law in December 2017. Throughout all 50 states, the District of Columbia, and the US territories, there are more than 8,000 Qualified Opportunity Zones designated by the Secretary of Treasury. You can find the full list here.
Taxpayers are able to invest in these Opportunity Zones through Qualified Opportunity Funds (QOP). How do these work and who can qualify for the benefits?
Opportunity Zones mainly function as tax incentives to spur economic growth in undercapitalized communities. If you are an individual or a corporation with capital gains, you can qualify and take advantage of tax deferral. Individuals and corporations must completely fill out Form 8996, Qualified Opportunity Fund, with its federal income tax return. For additional information, see Form 8996 and its instructions. The return with Form 8996 must be filed timely, taking extensions into account. This same form is “used to annually report whether the QOF met the investment standard during its tax year” per the IRS
Benefits of Qualified Opportunity Zones
Investors can take advantage of one or more of the following benefits:
Tax Deferral. You can defer your capital gains tax until you dispose of your assets or not be taxed until the end 2026. Investors can invest existing assets into Opportunity Funds. A Qualified Opportunity Fund is an investment vehicle that is set up as either a partnership or corporation for investing in eligible property that is located in a Qualified Opportunity Zone.
Step Up. If the investor holds the QOF for at least 5 years, the original investment’s basis increases by 10%; if held at least 7 years, the basis increases by 15%.
Exclusion. For Opportunity Fund investments held at least 10 years, investors will not need to pay taxes on capital gains.
Is Investing in An Opportunity Zone Right for You?
Opportunity Zones are economic development tools that benefit both the investor and the community invested in. As an investor, you may be considering if investing in Opportunity Zones is a good fit for you especially given the tax benefits. To learn more about Opportunity Zones, and Qualified Opportunity Funds, talk to our team at Growth 1031. Our team is a proven source of reliable information, a trustworthy ally in areas of uncertainty, and the standard bearer for client relationships. We serve clients in Los Angeles, New York City, and Chicago. Our 1031 exchange services include delayed exchanges and reverse exchanges, and we’re happy to answer any questions you may have.
What is a 1031 Exchange?
Guide to Propositions 58 & 93
Reassessment Exclusion for Real Property Transfers:
Between parent and child
From grandparent to grandchild
These constitutional initiatives provide property tax relief for real property transfers between parents and children and from grandparents to grandchildren. Collectively, they make it easier to keep property “in the family.”
In general, Proposition 58 states that real property transfers, from parent to child or child to parent, may be excluded from reassessment. Proposition 193 expands this tax relief to include transfers from grandparent(s) to grandchild(ren). In both cases, a claim must be filed within three years of the date of transfer to receive the full benefit of the exclusion.
For expanded definitions of Prop. 58 & 193, see Revenue and Taxation (R & T) Code Section 63.1. It is available online at leginfo.legislature.ca.gov.
Click on the link below to view the Printable Guide for:
Propositions 58 & 193
Parent-Child-Grandchild Exclusions
Get Direct Real Estate Tax Tips from the IRS On Like-Kind Exchanges
The IRS website is a great resource to learn more about like-kind exchanges. Click on the link below to learn more!
Does my primary residence qualify for a 1031 Exchange?
If you’re currently living in the property, it does not qualify for a 1031 exchange. The property must be used for investment or business purposes such as rental income from a tenant in order to qualify for a 1031 exchange. The new investment must be “like-kind” meaning that it will also be used for business or investment purposes.