Lake Tahoe and Incline Village 1031 Exchange

Often investors do not realize taxation on a personal residence is far different than taxation on an income or investment property. Under Internal Revenue Code §121, homeowners are allowed to exclude up to $250,000 of capital gains if single, $500,000 if married, upon the sale of a principle residence provided they have owned and occupied it two of the previous five years.

If an investor sells property they pay tax. Taxes are paid on capital gain, not equity or profit. However, property that qualifies for preferential treatment under Internal Revenue Code §1031 is treated quite differently.

"No gain or loss shall be recognized if property held for productive use in a trade or business or for investment purposes is exchanged solely for property of a "like-kind."

The benefits of exchanging include using leverage to maximize your investment dollars to property diversification to allow you the widest range of investment freedom. 1031 Tax Deferral can range anywhere from a simple swap of two properties to a complex, multi-leg, multi-property transaction involving a delayed, reverse or construction exchange. The investment strategy and the nature of the transaction will decide which exchange best suits your needs.

Imagine selling rental property or land, acquiring new real estate of any type and not paying one dime in capital gain taxes. Thousands of investors are profiting every day simply by using the tax deferred sale IRC §1031!
 

Frequently Asked Questions

What is the difference between a sale and an exchange?

A sale is an exchange of real property for cash. Because cash does not meet the requirements for "like-kind" property, the capital gains tax is not deferred. An exchange where property is traded for property is a "non-taxable" sale.


What provisions are required in a Purchase and Sale Agreement to enter into an Exchange?

Exchanges begin with a Purchase and Sales Agreement. When a Purchase and Sale Agreement is used to begin a transaction, it should contain language which establishes the exchangor's intent and notifies the buyer of the exchange.

Examples of such contractual provisions are:

When Selling:

"It is the intent of the Seller to perform an IRC Section 1031 tax deferred exchange by trading the property herein with Starker Services, Inc. Buyer agrees to execute an Assignment at the request of Seller at no additional cost or liability to Buyer."

When Buying:

"It is the intent of the Buyer to perform an IRC Section 1031 tax deferred exchange by trading the herein with Starker Services, Inc. Seller agrees to execute an Assignment Agreement at the request of buyer at no additional cost or liability to Seller."


Can an investor trade from several small properties into one large one?

Yes. An investor can also trade out of one large property into several smaller ones. When selecting more than one property, investors must adhere to the Treasury guidelines regarding property identification.

How are the exchange funds protected?

Starker Services, Inc. has a variety of security devices including semi-fettered accounts, letters of credit, Treasury-backed Securities and individual accounts.