How to Use 1031 Exchange for Mineral Rights in a Proper Way?
People are nowadays showing interest in the mineral rights over real estates, the reasons are quite clear. Several opportunities that let people defer the tax on gain are the interesting part that attracts people to invest in it. In mineral and real estate, the like-kind property exchange is practiced for a long time and people have benefits with it. In order to utilize the like-kind property exchange that is better known as 1031 exchange, you should have a clear idea about the entire thing.
The section 1031 provides you with the opportunity that of tax deferral on certain conditions. By selling your property, you must earn some money and it will be considered as the capital gain eligible for tax. To defer the tax gain, you can invest the same or larger amount of money for buying another property that is a like-kind one. It should not be your own property. You can’t show that for the tax deferral. By purchasing a new property, you can defer the tax gain, and this is possible through the 1031 real estate like-kind exchange.
In this situation, you will have a limited period of time. After the purchase of your new property, you will get 45 days to show the like-kind property meeting all requirements to defer the tax. And within 180 days you will have to purchase the same. In this period, you have to find out the property and its seller who agrees on the point. There is no such requirement for the direct trade. The law permits you to act through a mutual agent. Hiring such intermediaries, you will be able to hold your selling option until you find a proper replacement for that. The property holder, that is you would not have any access to the fund of the sold property. The selling and purchasing option should be opened to the agent and that is the best way to identify and acquire a new property after the sale.
This rule is applicable to the mineral rights as well. You can exchange your mineral right with a like-kind right and defer the tax. The property must be similar, and the price of purchase should be same or higher than the old one. For the mineral right lease also, where you can get the royalty, this option is opened. Under certain situations, this leased right is also eligible for the 1031 real estate like-kind exchange. If a lessee is capable of exchanging leased right where the property and the royalty benefit are also the same, it can be exchanged.
It is always better to get an experienced agent to deal with these property exchange under 1031. The Ten31 Minerals is one of such companies who have expert people to act as agents for utilizing the 1031 options. Adequate knowledge and years of experience in this field make them well-acquainted with all the terms and conditions of 1031 which you may not know. Hire them and get the real estate like-kind exchange smoother than ever.