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Avoid capital gains tax with 1031

Capital gains are the taxes that you will be asked to pay when you sell your property or leave it to someone in your will. These taxes are on the gain, this means on the
difference between what was paid for the property and what it is worth today. There is however a section 1031 tax deferred exchange that you can use in order to avoid capital gains tax. This can be used when you sell an investment and you are simply going to replace it with another investment. In other words you can use the 1031 if you are buying a similar investment with the money from the fits. This can be called a like kind exchange and when you use this method you will have more money with which to invest.

Here are some of the basic rules and regulations that concern 1031:

The land in question must be rental, vacant or used for business, investment or trade purposes and if you want to use it for a 1031 exchange then you have to have a hold of it for a year and a day.

All proceeds must be held by someone unconnected to you, this must be a qualified intermediary.

You will only have 45 days in which to choose a list of new properties. You will then only have 180 days to make your final decisions as to the property that is for you.

You cannot change the names of title holders. They must stay the same.

All of the money made from the sale must be reinvested and if you do not want to pay capital gains you must spend the entire amount on new property.