Let’s talk about tax-deferred exchanges and the ways that you approach them, taking advantage of Bob’s particular expertise on the subject.
Featuring:
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Bob Nelson: Well, if a person wants to potentially go out of an asset they no longer wish to own, that doesn’t make it a bad property. It’s just for them, they have greater opportunities doing something different. Now, in some instances, you have to sell for reasons that are unpleasant and use the cash for other purposes. But in so many instances, the individual says, “You know, I think I could do better doing something else.”
If you’re willing to stay in real estate, you could take advantage of the Internal Revenue Code Section 1031, which allows you to sell the property that you currently own and in a very brief period of time, the tax-deferred exchange rules acquire a replacement property. This held for a similar purpose, for investment purposes, for trader business purpose, or as a rental property, and defer all of the gain that you would have otherwise had to face and pay tax on and defer that into the next property, so literally you’ve changed properties without a tax consequence.
Marcia Edwards: And you may not know that it would be good for you to do this, so I would digress just for a moment and say if you’ve been holding an investment property for some time and you’re wondering if there’s a better return, if you had an alternative source for that income in investment property of a different type, remember, like kind is really real estate to real estate. It could be vacant land, it could be apartments, it could be from wherever you’re coming in real estate to where you’re going can be very diverse.
Bob Nelson: Yes, as long as it’s not your personal residence and as long as you’re not going to become a dealer in the property, or that you are a dealer in the property that you’re going out of, a dealer is a person who acquires a parcel of property, chops it into pieces, as an example, or does a fixer and then flips it. You’re not entitled to capital gains treatment or a tax-deferred exchange, but other than that you’re rocking and rolling.
Marcia Edwards: Now that’s real estate 1031 101. Let’s go up the scale in course, let’s go to the graduate school where you lived, Bob. We’re going to need to do that next program, but there’s a lot of ideas with financing and joint venture, and some things we can talk about in structure.
Bob Nelson: Oh, there’s a number of things that are just fantastic, but if you don’t know about it, you could step out and all of a sudden find yourself fully taxable and no benefit.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30 on KPNW for the “Real Estate Today” radio show.
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