What is a 1031 Exchange

Too many people mistakenly make themselves liable to pay capital gains taxes upon the sale investment property when they plan to purchase a replacement property. They simply haven't been told about the wealth building strategy allowed by IRC Section 1031.

On April 25, 1991, the IRS issued deferred exchange regulation-Reg 1.1031(k)-, that allows taxpayers to defer all of the capital gains taxes resulting from the sale of investment property, when they will use a Qualified Intermediary, follow the IRS guidelines, and use the money to buy more suitable investment property within 180 days of their sale.

This means that you can reinvest the money you would otherwise have lost to capital gains taxes (approximately 24.3 percent of your gain!) if you will use the extra money to buy more investment property for the purpose of making more money. This can be done within and between all classes of investment property anywhere in the USA.

More information at www.havenexchange.com

Fund safety during your 1031 Exchange

If you are planning to do a 1031 Exchange, please make sure to choose a qualified intermediary who provides transparency for the 1031 Exchange funds.

Several qualified intermediaries have gone BK this year due to having invested the exchange funds poorly. Taxpayers lost their nesteggs and still owe the taxes! A good qualified intermediary opens a separate money market account for your exchange and you should receive the monthly statement from the depository bank.In the past, we all looked to make sure a qualified intermediary had a fidelity bond and E&O insurance. Those instruments do nothing to protect from exchange funds being foolishly invested.

You need to be able to monitor your nest egg the entire time it is held by the qualified intermediary. I am only aware of two companies who provide this transparency: Haven Exchange and Exchange Resources. See http://www.havenexchange.com or http://www.exchangeresources.net.