Defer Taxes On Your Sold Investment Real Estate Property

Dated: 03/13/2014

Views: 559

Do you have a real estate investment property that has appreciated substantially in value?  Maybe you'd like to sell, but you don't want to pay the significant capital gains tax and depreciation recovery.  In this case, you may want to consider a Starker Exchange.  Essentially, you sell one property and use the funds to purchase another "replacement" investment property.  If you follow the IRS rules, you can defer any and all tax to a time when your tax liability may be greatly reduced.  The replacement property must be of "like kind", but generally speaking, all real estate is considered "like kind" with all other real estate.  That is to say a condominium unit can be swapped for an office building, a single family home for raw land, or a farm for commercial or industrial property.

Some additional rules are that the replacement property must be identified within 45 days after the relinquished property has been sold, all sales proceeds from the relinquished property must be held in escrow by a neutral party and go directly into the purchase of the replacement property, and the replacement property must be obtained no later than 180 days after the relinquished property is transferred.
The rules are very complex so make sure you seek both legal and tax accounting advice before you enter into any "like kind" exchange transaction.  
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Chuck Rifae

Chuck Rifae has been a leading Northern Virginia Realtor since 2002. Chuck holds the advanced designation of Broker of Real Estate for both Maryland and Virginia. When Chuck is not working with buyer....

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