Boise Real Estate Blog

Are You Interested In Boise Idaho 1031 Tax-Deferred Exchanges?

Boise Idaho 1031 Tax-Deferred Exchanges are popular with investors seeking to reinvest existing real estate equities while deferring capital gains taxes.

For example, I’m currently nearing completion of a complex 1031 exchange now with an out-of-area investor who’s exchanging into several Boise Area investment properties.

1031 Tax-Deferred Exchanges were created by Internal Revenue Code Section 1031.

In general, 1031 exchanges allow sellers of investment properties to exchange their equity from currently-owned properties into other suitable properties and defer paying capital gains taxes.

Note: There’s far more to the complexities of 1031 exchanges than that simplified explanation, so consult your tax professional for more information.

It’s prudent to wait until closing escrow on the sale of the underlying property to avoid wasting time and making offers contingent upon the closing of the underlying property.

Timing is critically important with 1031 exchanges, with a 45-day time limit for identifying replacement properties and a 180-day time limit for the closing of replacement properties.

Identifying replacement properties within 45 days is especially difficult in hot markets like our current Boise Area market.

That’s because few sellers will agree to delay the sale of their marketable property while a buyer decides which replacement property to buy.

That means finding and buying properties; not just identifying them.

I recommend closing replacement properties within the 45-day identification period because some identified properties may fail to close due to inspection issues.

If a replacement property fails to close after the 45-day identification period, and the participant has no other properties identified, taxes will be due.

Finally, it’s a good idea to use a 1031 exchange company to facilitate completing your 1031 exchange.

It’s critically important that the seller of the underlying property avoid receiving the net proceeds of the underlying sale if they wish to defer capital gains on that sale.

A 1031 exchange company will receive and hold the net proceeds from the sale of the underlying property, then distribute the funds to close the replacement properties, thereby avoiding receipt of those funds by the seller.

A 1031 exchange company will also ensure that all Section 1031 rules are followed and document the exchange details.

Like to know more about 1031 Tax-Deferred Exchanges and how you could benefit?

Just give me a call at (208)938-5533, or e-mail me and let’s talk!

IRS Section 1031 Information