Did you know over 64% of the properties on the market could or SHOULD be exchanged? The 1031 exchange allows investors to swap out an investment property for another and defer capital gains, losses or capital gains tax that you otherwise would have to pay at the time of sale. Tune in as David Moore covers the basics of investing with a 1031 exchange!Read the Full Transcript
David Moore: Hello, David Moore, Equity Advantage. And we’re going to talk a little bit about using a 1031 to, I’m going to say, defer taxes, it’s not a tax-free exchange. It’s a tax deferred exchange. So a lot of times people say, Well, hey, I’m going to have to pay the tax at some point anyway, why not do it today, and I might tell you to do it today because quite honestly, 1031, there is an opportunity cost of doing the exchange.
For those of you that have done one, you understand the most painful thing about any exchange is that 45-day timeline. Well, we’re in a period of time, and this is early March of 2023, the markets change dramatically, and we sort of jokingly say that the buyers have adjusted their prices on things, and sellers really have in a lot of cases, but if you look at your ability to defer a gain on something, what good is tax deferral if it ends up biting you at the end of the day. So if you’re contemplating an exchange going forward, a lot of times we have people start an exchange buy the 45 days to figure out what they can find out there, but I’m going to tell you, understand what 1031 G6 says with respect to your ability to get out of the exchange, and really, if you start the process, you’re married to us for 45 days. If you get to the 45th day, do not throw a property in that identification, just in case.
Just sync the transaction, ask the exchange company to send your money back because at that point, why not sit on the goal that you might be able to jump on, take advantage of some of these other opportunities going forward. So, once again, 1031 is tax deferral, it’s not tax elimination, and you’ve got to look at that opportunity cost of the exchange, does that 45/180 put you in a boat where you’ve got to spend more on something than you really want, and if you understand what your tax liability is, maybe today is the day that you just say, Hey, I’ll buy the 45 days, but if I don’t find it at that point, I’m going to terminate the transaction.
Now, I’ve got the cash to go forward. Thank you very much, David Moore, Equity Advantage, 1031exchange.com. Thank you.
The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.