Did you know that Section 1031 is a section of our tax code? It’s designed to defer taxes on a like-kind exchange.
Wait (…. narrator comes to a screeching halt). Tax code isn’t very sexy. Let me try again.
Let’s start with a story. My limited understanding of Thor goes something like this. Once upon a time….
The King of Asgard, Odin, thinks that Thor is an arrogant, vain, and greedy boy and casts him out. (Maybe Odin is like escrow.. but that’s probably a stretch.) He’s tough and can be intimidating, but in our hearts we like him. Odin feels he has sacrificed much to achieve peace among the people, and always has his reasons. We may not understand his rules, but they are there for a reason.
Then we have Thor. Let’s call him the Qualified Intermediary or the QI. Thor is a hero that fights terrifying monsters and protects the people. Monsters like.. I don’t know.. the tax code. He’s not afraid of any battle. He gives you his word and always comes back to fight.
We also have Loki. Thor’s brother who seems to tag along all the time. No one trusts Loki. They think he’ll steal everything if given the chance. Even Loki says you’d be a fool to trust him. Yet.. occasionally, Thor does need Loki’s help. Consider Loki the Internal Revenue Service (IRS).
Now, back to the tax stuff.
Let’s say you have had this investment property for years. You bought it cheap, the market has worked well in your favor, you’ve received a lot of rental income over the years, and have depreciated it to almost nothing for tax purposes. It’s an investor’s dream.
As the market as changes, you decide it’s time for a new property. You want to sell this one, but the capital gains and recapture tax on depreciation just hurt too much and you don’t want to pay it yet.
Here enters Thor, our QI. He’ll show you the way through a 1031 exchange so you can get your new property and not pay your taxes until later.
Want to know more on what I’m talking about?
Call (206) 293-1005 or email: Jen@HudsonCREG.com. I’ll send you my free Tax Exchanges Explained Guide. It’s always better to have a strategy and at least know how the options work!