The 1031 Exchange – A Real Estate Investor Strategy | Mark J Kohler | Tax & Legal Tip

The 1031 Exchange – A Real Estate Investor Strategy | Mark J Kohler | Tax & Legal Tip


Hi, Mark Kohler here and let’s talk 1031 Exchanges I love this strategy And it’s primarily used when you have highly appreciated real estate and that could be a rental property [or] it could be real estate Tied to your business somehow But it only works on real property you can’t 1031 Exchange of business or stock so if you’ve got a Property has got a big gain in it from when you bought it You [know] got some appreciation last time 1031 now some of you may know. This is a big topic So I’m going to hit the highlights here talk about it Broadly [two] issues, and you can determine if maybe it’s a good strategy [for] you Then you can research more or get a consultation now Here’s the concept you’re going to take one property and buy one of equal or greater value And you pay no tax in fact though what you really do is defer the tax So if this property is worth 200 grand and your basis was 100 if you’ve got a hundred thousand dollar game you’re looking down at the barrel you’re going to buy a new property of [$200,000] or greater and then the game you don’t pay it You’re still have a basis over here of 100, so the gain is still there You’ve got this one hundred thousand dollars hidden in this property but You can keep the property another five or ten years and then buy something of equal or greater value down the road So you kind of kick the can? And don’t pay the tax for now that [can] [be] a huge benefit when you couple it with other strategies in the future Now the next cool principle is you can exchange three properties for one or sell one by three? So if we just stick it [here], and we’ve got this $300,000 property I can buy three properties that equal [$100,000] each for a total of three hundred thousand so I’ve bought Property and whole that’s equal or greater to three hundred Grand So I can buy what sell one and buy three or [I] could sell three 100 and buy one for three hundred so I could do the reverse of it, but the beauty is it can be multiple properties exchanged on either end of the equation Now let me hit how it works, and I’m going to hit this diagram quickly here and you can review it if you need to here you are the taxpayer and You’ve got a house And you want to sell it you want to trade it for a property over here In this [seller] has a property [just] that fits your liking But he doesn’t want your property so how are you going to exchange this one for that one at Legal or greater value? When are the stars going to align and this come together? It never does so what happens is someone gets in the middle called a qualified intermediary this is like an escrow or a title company type service and they’re going to be the middleman between this transaction because you’re going to find a Buyer and This Buyer actually wants your house, not this guy And so what happens is you sell the property to the through the qix kind of exchange if you will or escrow and the Buyer gets your property the buyer puts in the money and Then the money sits there until you’re ready to find or buy that new property the money goes over here at the right time You never touch the money and this property goes bink bink Over to you So the [properties] sold the money goes in the money goes to the seller and you get the property and again you didn’t touch [it] At all the qualified intermediary did all the paperwork, [so] you walked away with no, tax Now let’s talk some timing rules because the irs is cool about this and it’s a pretty awesome strategy But they don’t want you take it a long time with that money sitting in the Qi They’re like if you want to do a 1031 let’s move it along, so the first deadline or rule You got to know about is the 45-day identification period So within 45 days [you’ve] got to identify In writing with [a] [fax] or an email or something that can be date stamped that shows the world what you’re going to buy So within 45 days so as soon as you sell your property You’ve got 45 days to kind of let everybody know What you’re going to buy is it going to be one property is going to be three properties? [it’s] going to be ten properties now There’s some rules on How many if you’re going to do more than three how many you have to? [Identify] and Can Denta fie and how many have to close and there’s some special rules we want to do some [research] on that if you’re doing? Multiple [properties], but the Basic point is within 45 days You’ve got to [identify] what you’re going to buy not buy it and you got to put it in writing now the next important deadline is the replacement period And you have a hundred and eighty days from the sale or that’s 135 Days from The End of Your identification period This 135 here in Smith, right So what you’re going to do is sell the property and they say you got to buy whatever you’re going to buy Within six months or 180 days on the fourth day you’re going to tell them what you’re [going] to do But then you got to do it within the six months Now the cool part here’s a say you fail on any of these levels you don’t find anything You want to buy or you don’t close on what you identify? Okay, [tool] deals over you take the cash you pay the tax But if you want to follow through that’s when you defer the text now There’s a lot more to study here and learn about the process if you’re considering a 1031 exchange [but] it really comes down to this [pull] [out] [a] piece of paper and go option one if I just sell this on The market just take my lips and pay my tax what am I going to net after? Taxes what am I going to net and what do I want to do with the money do I want to go buy other? Property by the way you can’t take the money and just pay off other property you know It’s got to buy something new or you’d say well. Maybe I’ll do this 1031 exchange and take option two what am I going to net with no tax being paid and But that is kind of cool because you can say well I can take this net and maybe it allows me to buy two extra properties Where here I can only buy one because I got to pay out for [ten] so there’s lots of options so run the two and see if it could maybe work in your scenario to have this extra money to Buy more and not give that money to the government anyway, the 1031 exchange is an awesome strategy for anybody that buys real estate on a regular basis and has appreciated gaming but if This looks like it could work for you get a consultation Anybody at our tax law firm would love to be of help whether it’s on the accounting side or legal side So give us a holler let’s analyze this and see if it’s a good fit [for] you Thanks so much for watching it if you found that helpful Please look in the description below [I’ve] got links to my tax and legal library my quickbooks training videos how to start a small business 50 60 70 videos some as long as 30 minute explaining more information on tax [illegal] strategies that will change your life Also, if you’d like to subscribe to my newsletter or check out my social media links Please click here [there] weekly free tips and strategies and articles that if you’ll find extremely helpful And I would appreciate it if you subscribe to my channel. I’ve got so many videos here I produce every week on my Youtube channel and I’d love to give you a ping every time I shoot a video Thanks so much and keep livin American dream

4 thoughts on “The 1031 Exchange – A Real Estate Investor Strategy | Mark J Kohler | Tax & Legal Tip

  1. The music killed the video.

  2. Thank you for a very clear advise. Just bought an investment property and have no idea as to how this rule works

  3. great video, thank you! however, i find the music on the background to be disturbing and louder than your voice.

  4. This speaker said something that is totally wrong, you can do a 1031 tax deferred exchange on a business only. I've done this many times in 34 years of selling businesses without property.

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