How to Take Advantage of 1031 Exchange for Tax Defer

1031 exchange capital gains

In order to defer the capital gain taxes, the people across the U.S. prefer 1031 exchange option. It refers a section in the IRS code where people can defer their capital gain tax from the sold property, royalty interest or mineral rights by purchasing another property, royalty interest or mineral right.

In the context of 1031 exchange capital gains and the scopes of the same, the topic of qualified properties for 1031 exchange is quite relevant to be discussed.

The Exchangeable Properties

When you are up to selling the mineral interests and using it to defer the taxes through 1031 exchange, you have to keep one thing in mind. IRS controls the entire process and it recognizes only the ‘like-kind’ properties for the exchange. The capital gain from the sale of the property should be utilized to purchase another property that is the same in nature and the price is either greater or the same to the sold one. The property may include real estate, mineral rights and royalties.

1031 exchange capital gains

The Tenure

If you want to utilize the 1031 exchange capital gains you need to strictly follow the rules of the tenure. After the sale of the property, the IRS gives you 45 days to recognize the property on which you want to invest next. The property has to be a like-kind property. You will get 180 days of time between the sale of your property and closing of the new investment. It is imperative to be compliant with the set of the rules and regulation of IRS in order to utilize the 1031 exchange option successfully.

1031 exchange capital gains

The Process

Due to the strict observation and rules and regulations set by IRS, the mineral right exchange process has become very complicated. A heap of documents, legal jargons and the terms and conditions can make you bewildered. A qualified intermediary should be involved to ease up the process. The lawyer with ample experience regarding this very sector can be your guide to defer the taxes without taking any hassle. The 1031 Minerals is a company which is dealing with this property exchange for a long time. Their experience and expertise in dealing with all types of complications will help you too to get the most benefit from 1031 exchange capital gains.