If you are a Propertied Business, the 1031 Exchange of

If you are a Propertied Business, the 1031 Exchange of Property Rule will be Completely Convenient

People love to name everyday things they do after the legal
section numbers that govern those things. If they need to file for their
taxes, they'll say that need to do their 1099s for instance.
There are lots of others too, if you would care to look for them. Businesses that deal in real estate as a matter of business or in a casual manner both often tend to speak of the doing a 1031 exchange of property. To the uninitiated, this might be a little mystifying. What exactly is that
number?

As you might guess, the curious number is the section under which the
rules to do with exchange of property are listed by the Internal Revenue
Service. Quoting legal section numbers tends to be a kind of insider
vernacular to lots of people. Usually, those intimidating -ounding section numbers just mask how simple the concept under discussion really is.

With the 1031 exchange of property section too, true to form the concept itself is simple enough if there is a business that owns property of some kind, when they sell it, the IRS waits to see if they keep the money or if they buy new property of the same kind with it. If they keep the money, they certainly have to pay taxes on it because the IRS thinks it's income. If they buy new property with the proceeds, then they grudgingly let you go. For those who like to speak like real people (and not like some cyborg), the 1031 exchange of property law is also called the Like Kind Exchange.

The law doesn't apply to regular people. Only businesses can make use of
it. When a business decides that it wants to go after this, the law
requires that they hire someone called a qualified intermediary to take
care of all the tiresome paperwork. They'll put the property in question up for sale, collect the proceeds, does everything necessary with the
documents and the escrow, and so on.

And then, the business and the qualified intermediary have to really act
quickly. They have exactly a month and a half from the day the sale closes to actually finding a new piece of property to buy. If they fail to do that or if they do a little too late, the IRS pulls them up for their pound of flesh. They don't even allow extensions if you apply.

When things are this rushed, you certainly didn't need the services of
your qualified intermediary. Usually, it will be quite difficult for a
business to get through with this before time runs out. Basically, when it comes to an exchange of property, it would be safe to say that there are two kinds.

First, there is the simultaneous exchange, that happens on the same day. The business selling property identifies something to buy beforehand and the whole thing happens within the day. Sometimes, if it's a business that has spare cash, they could even buy the property before they sell what they already have. That's allowed too.

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