This form is used when there is a tax free exchange proposed for buyer or seller.
Miami-Dade Florida Exchange Addendum to Contract - Tax Free Exchange Section 1031
Category:
State:
Multi-State
County:
Miami-Dade
Control #:
US-00472F
Format:
Word;
Rich Text
Instant download
Description
Free preview
Form popularity
FAQ
The basis of property acquired in a Section 1031 exchange is the basis of the property given up with some adjustments. This transfer of basis from the relinquished to the replacement property preserves the deferred gain for later recognition.
Under section 1031, any proceeds received from the sale of a property remain taxable. For that reason, proceeds from the sale must be transferred to a qualified intermediary, rather than the seller of the property, and the qualified intermediary transfers them to the seller of the replacement property or properties.
Another reason someone would not want to do a 1031 exchange is if they have a loss, since there will be no capital gains to pay taxes on. Or if someone is in the 10% or 12% ordinary income tax bracket, they would not need to do a 1031 exchange because, in that case, they will be taxed at 0% on capital gains.
Your 1031 exchange must be reported by completing Form 8824 and filing it along with your federal income tax return. If you completed more than one exchange, a different form must be completed for each exchange.
A 1031 exchange is a real estate investing tool that allows investors to swap out an investment property for another and defer capital gains or losses or capital gains tax that you otherwise would have to pay at the time of sale.
Timing Rules for 1031 Exchange Once the sale of your property closes, you have 45 days to identify potential replacement properties. You have 180 total days from the date of sale of your property to complete the purchase of the upleg property or properties.
A 1031 addendum will normally clearly show intent to do a 1031 exchange, permit assignment, and advise the other party there will be no expense or liability as a result of the exchange. Sometimes there is ?cooperation? language asserting that both parties to the contract will cooperate with a 1031 exchange.
When you don't exchange all your proceeds, it's called a ?partial 1031 exchange.? The portion of the exchange proceeds that are not reinvested is called ?boot,? and are subject to capital gains and depreciation recapture taxes. It's important to note that boot can take different forms.
A 1031 exchange is very straightforward. If a business owner has property they currently own, they can sell that property, and if they reinvest the proceeds into a replacement property, there's no immediate tax consequence to that particular transaction. They can defer any capital gains taxes associated with that sale.
The biggest pro of 1031 exchanges is being able to defer capital gains taxes....Cons of 1031 Exchanges: No Access to Your Capital, You Have to Roll It.You Also Have to Roll Over the Initial Investment, Not Just the Capital Gains.Complicated Structure.
