Investment Properties

It's time to take advantage of a strong Buyers' real estate market and low interest rates. Make Morton Realty your resource in finding the perfect real estate investment that will suit your needs. Our residential and commercial experts will guide you through the investment process with their expertise of the Sarasota area and knowledge of current market conditions.


1031 Tax Deferred Exchanges

Under Section 1031 of the Internal Revenue Code, investment or business property owners can sell one property and purchase a similar "like-kind" property while deferring capital gains. Capital gains taxes on the sale of the "relinquished" property are deferred until the "replacement" property is sold at a future date.
Instead of selling your investment property and paying enormous amounts of capital gains tax, use that money to buy another property!  This can be done through a 1031 Tax Deferred Exchange.  Morton Realty uses qualified intermediaries to assist you with this process and will work for you to find the property you need in order to stay within the IRS guidelines.

How does a 1031 Exchange benefit you?
Property owners will benefit from a 1031 exchange in several ways:
*  No immediate tax obligation
*  Improved cash flow is realized by deferring payment of capital gain taxes
*  Consolidation or diversification of business or investmen property holdings
*  Interest is earned on the sale proceeds until the new purchase is made

What is a "like-kind" property?
The term "like-kind" refers to the nature or character of the property, not to its quality or grade.  It does not matter whether the real property being sold or purchased is improved or unimproved because that fact only relates to the grade or quality and not its kind or class.  Examples of "like-kind" exchanges include:
*  Office for motel
*  Single family for farm
*  Multi-family rental for golf course
*  Unimproved land for retail space

What are the guidelines to fully defer the recognition of gain on a 1031 exchange and avoid possible taxation? 
*  All exchange proceeds should be used in the purchase of the replacement property
*  The debt on the property to be acquired must be equal to or greater than the debt on the property that was originally sold.  However, if surplus money is left unspent after closing, "spill-over" money can be invested in another property.

What are the steps involved in a 1031 Exchange?

Step 1:  The property owner enters into a sales contract for real property.
Step 2:  The property owner enters into an exchange agreement with a Qualified Intermediary.
Step 3:  The property owner assigns the sales contract for the relinquished property to the        Qualified Intermediary.
Step 4:  The net sale proceeds from the relinquished property are paid to the Intermediary at closing to be invested on behalf of the seller.
Step 5:  The property owner conveys title to the buyer of the relinquished property.
Step 6:  The property owner identifies the replacement property within 45 days from the transfer date of the relinquished property, and enters into a contract with the seller of the replacement property.
Step 7:  The property owner assigns the sales contract for the replacement property to the Qualified Intermediary.
Step 8:  The closing of the replacement property occurs no later than 180 days from the transfer date of the relinquished property, or the due date of the property owner's tax return for the year in which the transfer occured.
Step 9:  The seller of the replacement property conveys the title directly to the property owner.
Step 10:  The Qualified Intermediary transfers the proceeds of the relinquished property to the seller of the replacement property.


 

For more information on 1031 exchanges, contact Todd Morton at: ToddMorton@comcast.net