Title West Exchange is a Qualified Intermediary in 1031 Tax Deferred Exchanges.
If you own an income or investment property, you need to know about 1031 tax deferred exchanges. Why? The 1031 may be the best tax shelter left in real estate. By exchanging your property for another property of like-kind, you, the investor, have more money to either trade up to a more valuable piece of property or utilize the additional leverage to acquire multiple properties because your taxes are not paid, but rather deferred until the ultimate sale of the property.
Your Need For TW Exchange
One of the things that must occur in order to comply with the provisions of section 1031 is the proceeds of the sale must not be in the control of the seller/taxpayer. If the taxpayer has constructive receipt of the sales proceeds, the exchange will be disallowed by the IRS. IRS regulations specifically allow for the use of a qualified intermediary to hold the exchange funds during the exchange period and thus the taxpayer avoids constructive receipt of the sales proceeds. TW Exchange is an affiliate of Title West. Our exchange program is designed for speed, accuracy and safety. Every aspect of the exchange is managed in accordance with IRS rules and regulations. So, relax and let TW Exchange guide you through the exchange process.
How Is The 1031 Exchange Beneficial To You?
When you defer the tax due on an exchange, you are able to move from one investment directly into another without having to liquidate other investments or purchase less valuable property in order to pay the taxes that would normally be generated by a sale. This tax deferment frees funds for new purchases, capital improvement, research and development, etc.
What Is A 1031 Tax Deferred Exchange?
A tax deferred exchange is a transaction involving the transfer of one piece of investment or income property and the receipt of replacement property which will be used as income or investment property. When certain criteria are met, as defined in Internal Revenue Code Section 1031, the taxes on any capital gain realized from the sale of the relinquished property are deferred until some time in the future, usually when the replacement property is sold. The transaction is basically little different from an ordinary sale and purchase of property, except that certain documentation must be present to show that the transfers are intended to be part of an exchange and not a sale.
Under IRC Sec. 1031, neither gain nor loss is recognized when property held for productive use in trade or business or for investment, is exchanged solely for like-kind property to be held either for productive use in a trade or business or for investment. The exception only applies to the current recognition of gain realized. The realized gain is deferred until the replacement property is transferred in a later taxable transaction. Thus, the deferred gain is only potentially taxable. It may be avoided altogether if the replacement property is held by the taxpayer upon death when its basis is stepped up to the date-of-death value.
One of the rationales offered as justification for non-recognition of gain or loss on an exchange is continuity of investment or liquidity. The continuity of investment or liquidity rationale for non-recognition or gain or loss on an exchange derives from Congress' concern that:
"If the taxpayer's money is still tied up in the same kind of property as that which it was originally invested, he is not allowed to compute and deduct his theoretical loss on the exchange, nor is he charged with the tax upon his theoretical profit. The calculation of profit or loss is deferred until it is realized in cash, marketable securities, or other property not of the same kind having a fair market value." This rationale is also based upon congressional concern that taxpayers would not have the cash to pay the tax if an exchange triggered recognition of the gain.