1031 Exchanges to Lake Tahoe

homes for sale in lake tahoeLake Tahoe 1031 Exchanges

1031 Exchanges to Lake Tahoe are fairly common because it’s an ideal way to defer your capital gain tax. Be sure to always check with your accountant before doing a 1031 exchange. Also you will need to identify and close escrow on the property you are exchanging to within the specified time period.

1031 Exchanges

A 1031 exchange  is also known as a tax deferred exchange, and a simple strategy/method for selling a property. It must be  qualified, and then proceeding with an acquisition of another property (also qualified) within a specific time frame.

Under Section 1031 of the U.S. IRS Tax Code, the exchange of certain types of property may defer recognition of capital gains of losses due upon sale.  The purpose is to defer any capital taxes otherwise due. If you sell one property and then buy another “like” property, you won’t have to pay capital gains tax on the sale.  For example, if you sell a triplex in San Francisco and buy a duplex in Lake Tahoe  you won’t have to pay capital gains on what you earned on the sale in San Francisco.  If you sell a warehouse in Los Angeles and buy a warehouse in Seattle. You won’t have to pay capital gains on the earnings from the building in Los Angeles. The tax deferred exchange is only applicable to like properties that are investment and business properties and cannot be used in  primary and secondary residence purchases.

Locally we’ve had several inquiries about “like” properties in which investors are looking for.  They want to take advantage of the current market and are trying to buy a Lake Tahoe property after they’ve sold their property elsewhere.

Why 1031 exchanges are so popular

Any Real Estate property owner/investor of Real Estate, should consider an exchange when they expect to acquire a replacement. “Like kind” property subsequent to the sale of their existing investment property.

  1. Anything otherwise would necessitate the payment of a capital gain tax. Which is currently 15%, but may go to 20% in future years.
  2. Also include the federal and state tax rates of your given state when doing a 1031 exchange. The main reason for a 1031 is that the IRS depreciates capital real estate investments at a 3% per year rate. As long as you hold the investment, until it is fully depreciated.
In order to qualify your exchange for tax advantages. The 2nd property must be identified within 45 days of the sale of the first property and escrow (official changing of hands) closes within 180 days of the original sale. There are a few other rules, so contact me if you have any questions.