How to Use 1031 Like Kind Tax Deferred Exchanges to Build Wealth #1

Many people who have lived through the recent recession may be hesitant to believe that it is possible to build well and achieve you real estate goals but this is not true. Even though many people are still suffering the aftermath of the recession as far as being unemployed and struggling to pay their bills, there is a great deal of opportunity for those individuals who are determined and committed to purchasing real estate. If you look over the course of history you will see that in many cases the most difficult of economic times present the best opportunity to grow and build wealth. For many people, owning real estate is what's known as the American dream. While this is a great feeling, it is even better if you can use 1031 tax deferred exchanges in order to accumulate wealth and defer your capital gains taxes. Many individuals would otherwise be responsible for paying capital gains taxes on properties they sell immediately. It is a mistake to assume that you can simply sell your property and complete the paperwork for a like kind exchange when you file your tax return for the year. Those who do not get the professional advice necessary to do a 1031 exchange may discover that it cost them a lot of money as well as qualifying for the exchange at all. There are very strict and clear timelines about selling and purchasing properties in a 1031 exchange.

First of all, you should know that the property needs to be held for productive use in trade or business or for investment purposes. It has to also be exchanged for like kind property that will also be held with the same purposes. Like kind doesn't necessarily mean that these need to be exactly the same.

After you determine that your property meets the eligibility for a like kind exchange, you have to identify a replacement property within 45 days. Getting this particular requirement wrong in your 1031 exchange could be very problematic and cause you to have to pay the taxes that you thought were going to be deferred. You also have a 180 day exchange period for purchasing the replacement property.