13 March

A few secrets about the 1031 exchange rule

It is certainly no secret that the world is constantly changing and each domain part of it is growing and growing, establishing its own rules and regulations. The world of business is without a doubt one of the domains that is prone to change. This is actually an interesting example, because business itself is directly influenced by changes in policies and the legislations. The 1031 exchange rule is a highly discussed topic and it seems that it is on everyone lips. This particular piece of legislation tackles with the commercial real estate exchange and it discusses the way through which properties with a clear purpose can be swapped. This regulation seems interesting and highly advantageous for business owners, which is why it would be interesting to read a bit more about it. Here are a few facts you might find helpful.


The 1031 exchange regulation: business only


It is very important to understand that this regulation, as appealing as it might sound is for businesses only. Even though you can swap properties, you have to do so with those that are focused on business. Of course as you might realize along the way, this regulation has certain loopholes, but it is best stay within the clear lines.


The 1031 exchange regulation is broad


One of the good things about this regulation is that it is highly liberal. It is true that its intent is to help business owners invest in their business by lowering taxes and at the same time, help the real estate market regain its high profitable level.  When saying that this regulation is broad the fact one refers to is that you are told you are allowed to swap one commercial property for another. However, you do not get specific rules about the type of properties that are actually swapped. In other words, if you owned a two floor house with a garden used for commercial purposes, you could change it with a piece of land that is not arranged. It is in the broadness of the term that you will find those loopholes, previously mentioned.


The 1031 exchange regulation taxes cash


In some cases, certain transaction might end in cash profit. It not usually a normal practice, as most business owners prefer to have the transaction completed simply by swapping properties. The 1031 exchange regulation applies taxes on the cash revenue resulted from the transaction.


The 1031 exchange is a regulation that is highly talked about by business owners and of course realtors. However before jumping for the occasion, you first need to get as much information as needed about the regulation in question. Focus on loopholes, understand what commercial properties are and how exactly you could complete a property swap. Make sure you obtain a many details as possible. Otherwise you might not enjoy the advantages of this regulation to the fullest. It is very important to be informed, because the 1031 exchange regulation is in fact beneficial and it would be wise to make the best of it as much as possible.