1031 Tax Exchange - Santa Cruz County California

Sellers can avoid capital gains taxes when selling investment properties by using a 1031 tax deferred exchange. This involves selling one investment property and buying another using a 1031 exchange.

Although an exchange can be complex here are the basics:

• The seller should choose a Qualified Intermediary to assure the proper execution of required documentation.

• Purchase and sales agreements should notify everyone involved that the seller will be doing a 1031 exchange.

• Once the property being sold closes escrow the seller has 45 days to identify the replacement property and 180 days to actually close.

Recently there has been a change made to the law affecting non-owner occupied properties. Prior to the change, if an owner moved into an investment property and lived there for two years as there primary residence they were able to sell and not pay tax on profits up to $250,000 ($500,000 if married). As of October 2004, an owner must own the property for a total of five years and live in the property for two to have it qualify as their primary residence.

Persons selling their primary residence can still protect $250,000 ($500,000 if married) as long as they have lived in the home for two or more years.

I have helped many clients buy and sell properties using a 1031 exchange. It is important to follow the guidelines very carefully. It pays to work with someone knowledgeable. Contact me today!

***Always discuss a 1031 tax deferred exchange with your tax advisors.