You can perform a 1031 exchange on the company’s real estate and sell the business to a buyer at the same time. You could also sell only the business’s real estate, without selling your business, and use a 1031 exchange to benefit from tax-deferment while continuing to operate the business.
What is like-kind property in a 1031 exchange?
“Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land.
When to use 1031 exchange for commercial real estate?
The legal reasoning behind Section 1031 is that when a property owner has reinvested the sale proceeds into another property, the economic gain has not been realized in a way that gives the seller actual money to pay a tax.
Can a 1031 exchange be executed in both names?
Another option is that you keep the property in both names and then buy the new property in both names – execute a 1031. Then once the 1031 is complete, split up the property, so that in this case taxes are deferred by both husband and wife.
How long does it take to replace a property in a 1031 exchange?
From the time of closing on the relinquished property, the investor has 45 days to nominate potential replacement properties and a total of 180 days from closing to acquire the replacement property. Identification requirements: The investor must identify the replacement property prior to midnight on the 45th day.
What does like kind mean in 1031 exchange?
Often the definition of “like-kind” has been misinterpreted or misunderstood to mean “The requirement of the acquisition of property to be utilized in the same form as the exchange property”. In laymen’s term, hotels are for hotels, apartments are for apartments, farms are for farms, etc.
