Like-Kind Exchanges (1031 Exchanges) Lawyers Based in New York
Under Section 1031 of the Internal Revenue Code, investors can exchange one kind of property for another without being liable to pay capital gains taxes immediately after the sale. This is only if the properties are of “like kind”, therefore negating the need to recognize any gain or loss from the exchange. This means that capital gains taxes are only payable when you cash out. However, the process of conducting an exchange is far from straightforward.
If you have lost funds from a 1031 exchange due to misappropriation or been misguided into doing so, legal guidance is available to you at Weltz Law. Call us at (877) 905-7671 today.
What Are Like-Kind Exchanges (1031 Exchanges)?
You may be wondering what exactly qualifies as a “like-kind exchange”. The first condition is that the property must be used for business or investment purposes. Therefore, real estate held for residential, inventory or resale purposes are not eligible for like-kind exchanges. In addition, both involved properties must be located within the United States. It is possible for multiple properties to be included in the exchange, for instance, you can exchange one larger property for two smaller ones of equal value.
To avoid the immediate payment of capital gains taxes, the purchased property must have a net market value that is equal to or higher than that of the property being sold. Acquisition fees are also included in the calculation of the total cost of the new property. A partial 1031 exchange can be carried out if the value of the new property is less than that of the one being sold.
Proving Like-Kind Exchanges (1031 Exchanges) Losses
To qualify for a 1031 exchange, the seller cannot touch the money from the sale of their old property. Instead, the funds must stay in an account until they are ready to be exchanged for the new property. This is where some investors have encountered a problem. This money is under the care of a Qualified Intermediary (QI) for the duration it is in the account. However, there are little to no regulations governing what Qis can do with the money, making it vulnerable to misappropriation, which has happened before on numerous occasions.
Recovering Damages from Like-Kind Exchanges (1031 Exchanges) Losses. We Represent Clients Nationwide!
If you need advice prior to making a 1031 exchange or suspect you have been the victim of fraud relating to a like-kind transaction, Weltz Law can help. Our attorneys are well-versed in the latest securities litigation laws and can advise you on the best legal course to take.
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