A Qualified Intermediary under I.R.C. Section 1031
Eastern Equity Exchange Corp.
734 Millbrook Lane
Haverford, PA 19041
ph: 610-645-9555
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What is a Section 1031 Tax Deferred Exchange?
IRC Section 1031(a)(1) states 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 for productive use in a trade or business or for investment."
A 1031 tax deferred exchange is the method by which a taxpayer who owns property which has been held for investment or for use in a trade or business can exchange the property for like kind property which will be held for investment or in connection with a trade or business and defer paying some or all of the federal capital gains taxes. For investments held by individuals, the deferral can continue through any number of exchanges until the tax liability is extinguished by death.
Any property or other consideration not "like kind" in an exchange. Boot is any cash received by the taxpayer and any debt the taxpayer is relieved of may be recognized gain or "boot". The taxpayer may deposit additional cash for the acquisition of replacement property to offset debt relief. However, debt assumed on the replacement property will not offset cash received from the relinquished property.Enter a detailed description of your product or service.
General Rule: In order to defer all capital gains, taxpayer must purchase equal or greater in value and equal or greater in equity.
Example 1 - Equal Value & Lower Equity
Relinquished Replacement
Value $750,000 $750,000
Debt $450,000 $550,000
Equity $300,000 $200,000
[$450,000 debt relief is offset by $450,000 of the new debt, but the $100,000 cash received is not offset by the remaining $100,000 of new debt = $100,000 TAXABLE BOOT]
Example 2 - Lower Value & Equal Equity
Relinquished Replacement
Value $750,000 $500,000
Debt $450,000 $200,000
Equity $300,000 $300,000
[$450,000 debt relief partially offset by $200,000 new debt, but the remaining $250,000 of debt relief is TAXABLE BOOT]
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Eastern Equity Exchange Corp.
734 Millbrook Lane
Haverford, PA 19041
ph: 610-645-9555
info