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Benefits of a Construction Exchange
1. Flexibility in the Choice of Replacement Property
Timing and location are two major components of any successful real estate transaction. Knowledgeable taxpayers, aware of the opportunity to defer tax by exchanging their real estate for like-kind property, will begin their search for replacement property well before listing their relinquished property for sale. Many times, however, a suitable building cannot be located in the area where the taxpayer seeks to relocate. Instead of refusing to sell, or settling for less than perfect replacement property, the taxpayer can purchase vacant land and construct its own building, or a taxpayer could buy the less than perfect building and make any necessary repairs and renovations, in both instances, if structured properly, qualifying for tax deferred treatment.
2. Fully Utilize Exchange Funds to Avoid Tax
Many exchangers identify replacement property with a purchase price less than the sales price of the relinquished property. This trade down in value is subject to tax. The tax can be avoided, however, if the replacement property is parked by an exchange accommodation titleholder, and the excess funds in the exchange account are spent on improving the replacement property thereby increasing its value to a level equal to the net sales price of the relinquished property.
Call the knowledgeable exchange professionals at All States 1031 at
1-877-395-1031 for a complimentary consultation regarding your specific investment objectives.
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