Starting the process of a 1031 exchange might seem overwhelming, but you can get help by doing a little research and enlisting a qualified intermediary to help you understand the most important details. You may hear 1031 exchanges being called fully tax-deferred exchanges as well, but there are guidelines you must follow in order to ensure that you reap the benefits of this opportunity properly.
In order to meet the IRS guidelines, the person exchanging property must be making an equal or up in equity trade or an equal and up in fair market value trade. In order to defer taxes, the funds acquired as net proceeds from the property relinquished in the exchange must be used as a down payment on the second property. In addition, the exchanger has to replace any kind of mortgage that was paid off from the sale of the first property by obtaining an equal or bigger mortgage on the second property. Fair market value can be calculated as the selling price less the transaction costs such as recording fees, exchange service fees, brokerage fees, and title insurance fees.
Where the finer details really matter is how that money is exchanged. If, at any point during ทาวน์โฮมมือสอง กรุงเทพ the actual exchange, the funds for the exchange pass through the hands of the person exchanging it, the IRS could consider this a taxable event in terms of capital gains.
There is a way to have a fully deferred 1031 exchange, but you need an outside person known as a qualified intermediary to help you. A qualified intermediary can accept the funds for you and use them to purchase the replacement property so that you can obtain all the tax benefits associated with the exchange.
If cash is received as part of the exchange, the IRS may consider it "cash boot", making an individual exposed to capital gains taxes. This rule can hold no matter what position an exchanger holds in regards to cash on the relinquished property. This applies regardless of the size of the down payment received from the exchanger, the principal paid down, or any capital improvements made to the relinquished property.
If one of these rules is violated, the exchanger might lose out on having a fully deferred tax exchange. If the exchanger trades down in terms of equity or fair market value, it's likely that some kind of gain will be received. If this is the case but the exchange is otherwise valid, it is classified as a "partially deferred" tax exchange rather than a fully deferred exchange.
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