Section 1031 of the Internal Revenue Code allows
you to defer the payment of capital gains taxes, provided
the proceeds of sale are used to purchase other like-kind
investment real estate. There are specific rules governing
the transaction, which must be complied with in order
to have the exchange qualify under IRS regulations.
Exchanges can be simultaneous or deferred, as defined
by the code. The principal considerations are that
the relinquished property and the replacement property
must be “like kind” – held for use
in a trade or business or for investment. If a deferred
exchange is utilized, very specific time restrictions
must be adhered to – for example, the replacement
property must be identified within 45 days of the
settlement on the relinquished property. Up to three
properties can, and should be, identified, however
their total value cannot exceed a percentage of the
value of the relinquished property. Settlement on
the replacement property must be completed within
180 days or before the due date of the next tax return.
The proceeds of sale cannot be disbursed to the seller
but are rather disbursed to a qualified intermediary
who acts on behalf of the seller to acquire the replacement
property. Both the contract to sell and the contract
to purchase must contain language that identifies
the transaction as part of a 1031 exchange.
TitleMax utilizes the services of First American Exchange
Services, a subsidiary of First American Title, to
facilitate all exchanges. By employing a company dedicated
to the satisfactory completion and compliance of only
exchange transactions, you are assured that every
regulation has been met and that the IRS will not
subsequently challenge or attempt to tax the transaction.
Additionally, with First American your funds are guaranteed
to be safe and your qualified intermediary to be accountable.
TitleMax has negotiated a very competitive fee of
$600 with First American for their services. Click
here to access the First American 1031 Exchange
Services website, which will answer any questions
you may have on the exchange process.