1031 Tax Exchange
One of the number of ways to create wealth faster is to protect your returns on investment. Taxes are the number one adversary to any investor but there are LEGAL ways to get around Uncle Sam. One of the best tax deductible rules in America, which will hopefully come to Canada soon, is the 1031 Exchange.
Section 1031 of the internal revenue code states that:
“When a hard asset such as real estate is sold the proceeds can then be reinvested within the same asset class to be tax deffered at a later date”
Let’s take a look at how this works.
Scenario one: I have invested in a single bedroom home which cost me 200,000$ dollars, now appreciated to 250,000$ dollars. If you sell this property you would pay tax on the 50,000$ dollar profit.
Scenario two with 1031 Tax Exchange: I invest in the exact home at 200,000$ which appreciates to 250,000$ dollars. When I sell, instead of paying taxes on my 50,000$ profit I roll the 250,000$ as a downpayment on a 1 million dollar apartment building. I do not have to pay taxes on my profit until the day I sell the apartment building….unless I do another 1031 exchange into something larger.
There are, however, some catches…
+The 1031 exchange does not apply to stocks, bonds or any other paper assets.
+You must exchange with “like assets”, for example commercial property for commercial property etc.
+You have 180 days to roll over your revenue from your initial investment.
+The exchanged property must be identified in 45 days.
This only works in America but I’m hoping it will come to Canada soon. Please, if you are thinking of doing this I recommend seeing an accountant first! If you become a wealthy investor the Section 1031 of the internal revenue code could save you millions!
Good luck!
Kelly Parks
www.wealthforinvestors.com
September 8th, 2008 at 1:33 pm
Yes, tnx
If to look at this keynote that other prospects are astray shall see also…