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1031 Exchange

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.

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