Ocean Edge condo sales and vacation rentals, Brewster, Cape Cod

Great Locations Real Estate

OceanEdgeBrewster.com

(800) 626-9984

Owners of rental real estate or investment property can take advantage of a little known law dating back to 1921 which permits the seller to pay no Federal or state capital gains taxes on the sale.  Section 1031 tax free exchanges have been around a long time, but it was not until 1997 that the IRS regulations were simplified sufficiently to be user-friendly for most people.

Basically, you can continue to use the built in gains that are buried in the value of your property as long as you exchange the property for a like-kind property of equal or greater value. This is a very simplified definition and of course there are a number of conditions which must be met, but it is likely that you can benefit from this opportunity.

You may find this exchange particularly useful if you are selling your current rental property and want to re-invest the proceeds into a similar property within 180 days. As long as the transaction is property structured, the transfer can be characterized as a tax free exchange instead of a sale, which will result in the deferral of Federal and state capital gains taxes. 

Baby Boomers who are looking toward relocation after retirement are finding 1031 exchanges to be very friendly options. Swap your rental property here for a house in another resort area you might enjoy living in after you retire. Rent out the replacement property to tenants for a few years until you are ready to make your retirement move. Then sell your principal residence, pocketing up to $500,000 gain tax-free and move into your replacement house converting it into your principal residence.

There are a number of factors to consider and it is essential that the transaction be correctly structured. Documents must be property prepared and you will require the services of a qualified intermediary. If you are intrigued by the idea or curious about whether it can benefit you, please give us a call.