An Overview of the Kinds of 1031 Tax Exchanges

Man reviewing documentsBuying and selling property is among the most lucrative ventures nowadays. There are, however, various taxes involved in property transactions, which might not be so convenient for you. But Section 1031 of the United States IRS code allows you to defer the taxes from property transactions.

It is prudent to consult the best among the many 1031 exchange companies in Utah to get the ideal one for your situation. Here are some of the available 1031 tax services.

Simultaneous Exchange

This is the original type of 1031 transactions. In this tax service, your original property is sold and the replacement one bought at the same point in time and using one escrow office. A simultaneous exchange is tough to navigate, and hence just one player in a property transaction is involved in the trade.

Delayed Exchange

In delayed exchange, real estate is sold then a replacement one is bought within 180 days. The replacement property should be recognized within 45 calendar days of the sale of the original one. A delayed exchange is the most popular because of the window period between selling and buying replacement property.

Reverse Exchange

In this 1031 tax exchange, replacement property is bought before the sale of your original property. If you must close the deal of your replacement property yet you haven’t found a buyer of your original one, a reverse exchange is an ideal option. However, this tax exchange will not allow you to own your old and new properties at the same time, and so complications may arise regarding your deed transfer.

From the above tax exchange types, you will appreciate that there is one to suit virtually every need. Section 1031, however, only applies to transactions involving commercial and investment properties. With a good 1031 exchange company, you will know the best way to structure your properties to benefit from this profitable service.