Have you ever wondered why so many people prefer to use the 1031 tax deferred exchange? Well, you should know that the majority of commercial property owners use this strategy because it helps them benefit from plenty tax advantages. In a standard commercial real estate transaction, you as a seller would have to pay a tax from the gain you would obtain when selling your property. But the 1031 exchange is one of the mechanisms you have access to, and which offers you the possibility to defer the tax, by simply reinvesting into another property. If you are interested in having a dst investment you should contact a professional company, because they have the needed experience and knowledge for helping you deal with the process. Also, you should know that there are certain rules you have to meet in order to be able to apply for this strategy, and they are the ones who can help you understand them.
Make the exchange between similar properties
The main condition for being able to benefit from this exchange is to exchange your property with one of the same category. Their type might differ, but they have to be part of the same category. Also, you have the possibility to exchange it with whatever other property from the United States you want. Whatever properties used for investment or business purposes would qualify for the exchange, but you have to be sure that both your actual property and the one you intend to purchase, are placed within the borders of the country.
Consider the timing for the exchange
The guidelines state that the exchange has to be done in a certain time frame, and it cannot be extended no matter what reason you might state. You have 180 days to find a new property, and purchase it, if you want to benefit from the advantages of 1031 exchange. However, there is also specified that you can view other possible properties and decide to one in no more than 45 days, and in the rest of the period you have to close the deal with the owner of the property, and complete the transfer.
The price of the property has to be equal or grater
Other requirement of being able to apply for the 1031 exchange is the price. Therefore, the price of the new property has to be equal or greater than the one of the property you sell, because you have to use all the funds you have received from the transaction. In case you decide to purchase a property that is listed at a lower price than the funds you have received from the transaction of the property you had, you would also have to pay a tax for the remaining sum. Also, when opting for this strategy you have to make sure to collaborate with an intermediary, because it is necessary for this type of company to act as an intermediary. They would handle the sale of the old property and deliver the money to the closing agent when purchasing the new one.