A 1031 tax exchange, also known as a Starker exchange is the act of swapping one investment or business asset for another. Swaps are normally taxable as a sale. However, if you come within the range of being able to use a 1031, you will either have limited or no tax due when the exchange happens. It is a wise choice to use reliable legal services to ensure that you are well within the law in regards to a Starker exchange in Davenport IA.
Starker Exchanges Can Be Complicated to Orchestrate
Starker exchanges can be a lot to manage. In most cases, at least four parties are involved including the taxpayer, the buyer, the seller, and that the qualified intermediary. A standard exchange includes the transfer of a relinquished property title to a buyer who then pays the qualified intermediary. The qualified intermediary pays the seller and then the seller transfers the property title to the taxpayer. Any type of exchange of property doesn’t need to occur on a one-on-one basis. Property exchanges can be identified as up to three different properties or more as long as the value does not exceed 200% of the fair market value in total for all the combined properties that are going to be relinquished.
Understand the Conditions That Must Be Met
Legal counsel can help you understand the conditions that must be met in order to qualify for tax-deferred exchanges. For the most part, most Starker exchanges are for real estate with a tenancy in common also being able to qualify. Properties in an exchange have to be used for investment or commercial purposes, and are not meant to be used for simple resale or a primary residence. Also, the replacement property has to be of like-kind to the one being relinquished. When you are ready to embark on your first Starker exchange make sure you using the proper legal services so the exchanges handled properly.
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