The sale of a business or investment asset, whether
it is real estate or capital equipment, can create a large tax liability.
A properly structured tax deferred exchange under Internal Revenue
Code §1031, however, allows businesses and individuals to defer
the recognition of the capital gains or other taxes associated with
the sale of most business or investment assets, as long as new assets
are purchased to replace the existing assets. In general, most tax
deferred exchanges are structured either as a real property or a
personal property exchange. Real property exchanges include only
interests in real property, while personal property exchanges encompass
virtually all other types of property.
To be eligible for the favorable tax treatment afforded
by an exchange, the property or business asset to be disposed of
must have been held by the client for productive use in a trade
or business, or for investment purposes, and be exchanged for like-kind
replacement property that will be held by the client for similar
purposes. With few restrictions, whether an exchange involves a
parcel of real property, an airplane, a broadcast spectrum, or a
fleet of cars, exchanges allow businesses and individuals the flexibility
to sell property to whomever they wish, and to buy new property
from whomever they wish. There is no requirement that property be
“swapped” to be eligible for an exchange nor do exchange
transactions require any significant changes to the terms of the
sale and purchase agreements. By utilizing an exchange clients are
able to maximize their capital by deferring the taxes that would
otherwise be incurred on an outright sale of their property and
use the entire amount of the equity from the exchange to acquire
substantially more replacement property. Properly structured and
administered, an exchange becomes an invaluable tax saving tool
and an integral element of the business cycle. For a more detailed
explanation of the various elements and regulatory requirements
of tax deferred exchanges, please refer to a complementary copy
of the IPX1031® Brief Exchange booklet that is available from any
of our numerous regional sales and processing offices.
When you are selecting a Qualified Intermediary
to assist you in your next tax deferred exchange, whether it is
the exchange of a single real or personal property asset or for
your ongoing multiple asset or fleet exchange program, select the
Qualified Intermediary with the highest level of security, expertise
and service in the industry to be your key to a successful exchange– |
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