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1031 Exchange
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·2 min read

What is the 1031 exchange and can foreign buyers use it?  The US government makes it possible for a foreign seller to use the 1031 exchange provisions. When an investor sells an investment property, they can defer all of their capital gains taxes if they choose to invest 100% of the net gain from the sale in the purchase of a new investment property in the United States. This is called a "1031 Transaction" and is something a foreign buyer can use to avoid capital gains taxes as well as FIRPTA withholding. Please note that if a foreign seller chooses to use this exchange, he must identify his new investment property within 45 days of the sale, and must close on that property within 180 days.  The 1031 Exchange is a Real Estate Investor's Best Friend The concept of exchanges to defer Taxes, is found in the Internal Revenue Code in section 1031 (IRS Section 1031 for its acronym in English) this rule has been available for more than 90 years and is used by investors to defer taxes on the capital gain, recovery of depreciation and tax rates However, many investors fail to use this tool to create wealth, because they simply do not know the benefits and do not understand the guidelines that the "IRS" has set. What is a 1031 Exchange?  The 1031 exchange is a tax strategy that real estate investors use to defer paying taxes when an investment property is sold. Section 1031 of the Internal Revenue Code establishes the rules that an investor must complete in order to carry out a successful Exchange. Once the investor has decided to make a 1031 exchange, the process is quite clear, the IRS orders that there must be an independent third party called "Qualified Intermediary" or "Qualified Intermediary / Accommodator" Here are some basic rules to follow in the Exchange process: -Property qualification: The properties involved in the exchange, that is, the property or properties to be sold and the ones to be purchased, must be owned by the investor with the intention of producing income and/or income, Investment/ appreciation and/or use in a business must also be exchanged for another of the same nature "like-kind." -Prior to closing on the property being sold, the investor must show intent to do a 1031 exchange. They have 45 days from the closing date on the property they are selling to identify potential replacement properties, i.e. properties they plan to purchase. and you have 180 days from the closing date of the property you sell to close on the property(s) you have identified. Investing in properties in South Florida is easy if you have the advice of the right professionals, we will communicate to make sure that the process is a pleasant experience for you and your family.