Navigating the 1031 Exchange Minefield

Doing a Section 1031 exchange transaction may be one way to help process your property as you swap it for another. This is especially true when you're dealing in real estate or other large tangible assets. However, doing a 1031 carries a lot of potential dangers, to the point that it can blow your finances out of the water if you're not careful. Here are some tips to avoid that.

As 1031 exchanges mostly deal on like-kind property, this is often misinterpreted as a tit-for-tat thing; some experts say that like-kind property deals with its intended purpose instead of type, such as a rental house for a tract of land. It is important for a taxpayer to familiarize with all of the key regulations during the structuring of the exchange.

If you've relinquished your property, you only have 45 days to find a replacement property, but do not wait until the last few days to start looking. Time is of the essence because you cannot mark a replacement property when the window has closed. If you do decide to sell a property and closed the deal, forget about a sudden change of plans to do a 1031 exchange.

These are only a few dangers you can prevent at the early stage of a 1031 exchange. A credible 1031 specialist can help you get all your bases covered.


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