Arizona Retirement Home Buyers: Know The 1031 Tax Deferment Law

If you own an income or investment property and are thinking of exchanging or trading it for another investment property, knowing the 1031 tax deferment law can greatly reduce your out of pocket expenses during the sale. A deferment or "deferred exchange" means that since you have traded your property for another you can defer the tax on the capital gain on the sale until you sell the property. This allows you to change properties by trading without having to put up the cash for the tax at the completion of the sale. The calculation of loss or gain is deferred until it is realized in cash or in other marketable securities. At that time the tax will be calculated.

Requirements I Must Meet To Qualify 1031 Tax Deferment

"IRC Sec. 1031 provides that "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment", IRC Sec. 1031(a)(1)." This means that you must be exchanging your investment or income property for another similar property. You must trade properties in order to qualify.

It Sounds Interesting But I Am Not Sure I Can Do It Myself

As in any legal matter it is best to have someone who knows the ropes helping you out. Your lawyer can help you apply for the 1031 tax deferment and there are companies, which specialize in helping people through the process. Title insurance companies can be very helpful in this regard. Ask your real estate agent if they have any recommendations.