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Why 1031 reverse exchange
This particular exchange is getting to be more and
more popular all of the time and there is a good reason for this. While
this may be one of the more complicated forms of the
1031 it is also
one of the most flexible ones. You will have much more control over the
way that you structure the entire exchange.
Your property will not have to be already
owned with the reverse 1031. And you will also be able to control the new
property even before the first has been sold, this in itself is one of the
most popular aspects of the reverse 1031. This is great because you will
be able to secure your new property before you get rid of the old one
which protects you from loss.
There are several different reverse exchanges that
you will be able to choose from and
all you need to do is
find the one that is right for your particular situation.
Traditional Reverse
This is not a safe harbor reverse because of the fact that it cannot
stand in the timeframes like a safe harbor. This reverse exchange is
riskier and more likely to be flagged by the IRS that is why it is so
imperative that everything be done correctly.
Safe harbor reverse In
this option the accommodator will be taking control of the new replacement
property before their old property has been sold to another buyer. If you
are exchanging properties you will have to identify the properties within
the first 45 days and all other detail must be taken care of in the next
180. If you structure this properly you will be considered to be in a safe
harbor b y the IRS. This is a harder to meet option but it is by far the
safest.
Construction/Improvement
Reverse It is with this option that you will be able to take
control or park a piece of property that is to be improved. This is great
for those who want to do something with their property as they will be
able to fix it up during the exchange period. This way you will have the
power to actually design your exchange property. This is a more
complicated exchange option and there will be much more red tape and
documentation involved with it. There is significant risk involved with
this sort of reverse exchange.
Leasehold Improvement
Reverse This is not considered to be a valid structure by
everyone including the IRS. In this case you will actually add to or fix
up the property that you currently own, it is this property that will be
considered the parked one. This option is gaining in popularity but it is
very complicated and there will be large amounts of papers to go through
and sign.
Reverse exchange 1031 can be a very useful
tool to your investing but you have to learn what is what. These are
complicated exchanges so ask an expert to help guide you through things in
order to avoid any trouble with the IRS.
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