Thanks for checking out the Real Estate Today Podcast. We begin a six part series on 1031 exchanges with special guest Megan McMann.
Bob Nelson: And Bob Nelson, Eugene Commercial Real Estate Investment Broker with Pacwest Real Estate Investments.
Marcia Edwards: And I’m Marcia Edwards, Residential Broker with Windermere Real Estate. Joining us today is Megan McMann. Megan is our guru when it comes to 1031 exchange officers and facilitators at Cascade Exchange. Thanks for joining us, Megan.
Megan McMann: Thanks for having me.
Bob Nelson: Let’s get into the idea of the tax deferred exchange. It’s a transaction that’s been around since 1921, it’s gone through some evolutions and changes, but it’s absolutely there. I think the message to be put out at this particular moment, if you have any inkling that your property might qualify for a tax deferred exchange, get ahold of a person who absolutely understands tax deferred exchanges.
Marcia Edwards: Megan McMann.
Megan McMann: Yeah.
Bob Nelson: Exactly.
Marcia Edwards: Let’s just name it. Cascade Exchange is a local company does excellent work, analytical, knows their limits, can help you with your counsel, your realtor give them coaching as well. So definitely, why don’t you give us the exchange 101 version of, what is a 1031 exchange?
Megan McMann: Yeah, so if you have property that you’re holding for business or investment purposes and you want to sell it and reinvest in something else, there is a way for you to defer all of your capital gains taxes on that. So all you have to do is reinvest in other business or investment property that fits your needs going forward.
Bob Nelson: Does that property that I go after have to be identical to the thing that I’m selling?
Megan McMann: It does not, it has to be like-kind, meaning that it has to be real property to be held for business or investment, exchange for other real property to be held for business or an asset.
Bob Nelson: So I can’t do a sale of an investment property and put it into stocks or bonds?
Megan McMann: Correct. You would have to sell a rental property and buy another rental property, or sell an investment property and buy something else similar.
Bob Nelson: Okay.
Marcia Edwards: In regards to why we’re doing this again, you’re saying I can defer my tax on my gain, what does that mean?
Megan McMann: So anytime you sell business or investment property, you have to pay capital gains taxes on a federal and a state level, which is between 15% and 25%, typically. So this would allow you to sell that and push it forward and not pay it now.
Bob Nelson: So you’re simply deferring the tax obligation until you later sell the property that you replaced it with?
Megan McMann: Correct.
Bob Nelson: Okay. What happens if I do another exchange then?
Marcia Edwards: You know what? I’m cutting you short, we’re out of time.
Bob Nelson: Oh.
Marcia Edwards: But sit on the edge of your seats till next program or call Megan McMann at Cascade Exchange now. I’m Marsha Edwards, Windermere Real Estate-
Bob Nelson: And I’m Bob Nelson, Eugene Commercial Real Estate Investment Broker with Pacwest Real Estate in Investments.
Great information!