Section 1031 can be confusing to many investors who have never done a 1031 exchange. But if you have the knowledge and the right professionals to guide you, a 1031 exchange can be a huge tax savings tool. There are several types of 1031 exchanges. Here, we’re going to explain the most common type – the forward exchange.
Our team has been handling 1031 forward exchanges in Rochester and the surrounding area for decades. If you live in or own property in Rochester and are looking to avail yourself of the tax benefits of a 1031 exchange, contact us today to get started – 877.373.1031.
What is a Forward 1031 Exchange?
1031 exchanges come in two basic forms – the forward exchange and the reverse exchange. Before we get into the specifics of the forward exchange, let’s talk briefly about how the 1031 process works. In a 1031 exchange, you sell a piece of property (let’s say a building). Then you have 45 days to identify a replacement property, and 180 days total to complete your exchange – i.e. close on the purchase of your new replacement property. If you abide by those rules, you don’t have to recognize any taxable gain on the sale of your relinquished property. Instead, that money goes into your new replacement property.
A forward 1031 exchange is an exchange in which the replacement property is closed on before the purchase of the replacement property. This is how most 1031 exchanges are structured. Here are some of the types of real property that can be exchanged in a forward 1031:
- Real Estate
- Airplanes and Aircraft
- Agricultural Equipment
- Coins & other Precious Metals
- Business Equipment
Benefits of a Forward Exchange
So what are the benefits of a forward 1031 exchange? Well, as with any 1031 exchange, forward exchanges allow you to defer your capital gains taxes when you sell real property and reinvest those proceeds into other property (as long as it satisfies the like-kind requirement). As a result, your money continues to work for you, compounding and building your wealth over time, rather than writing a big check to Uncle Sam.
Rochester Forward Exchange Services
To learn more about the benefits of a forward exchange, contact one of our Rochester 1031 exchange professionals today. Our team can guide you through the process and facilitate your exchange to ensure its success. Our qualified intermediaries have been facilitating exchanges in Rochester and throughout Minnesota for decades. We have the knowledge and experience to provide you the best service possible. Give us a call today to start your forward exchange in the Rochester area – 877.373.1031.