The 1031 tax deferred exchange is a popular way to delay the payment of capital gains taxes from the sale of real estate investment property in California. That being stated, they tend to fail on a regular basis. You are certainly not alone if that has occurred with one or more of your investment property sales. It is actually a common occurrence and one that is becoming even more prevalent thanks to the Corvid 19 pandemic. First and foremost, it is incredibly difficult to locate and identify a replacement property within forty-five (45) days of selling your investment property in the best of times.
Now add in the aspect of social distancing. That has made it next to impossible since most of us are unwilling to tour properties in person. Although it is true that real estate agents are offering virtual tours, it certainly is not the same, and making a large investment in a replacement property is far too important to leave to chance. That is one of the many reasons why a plethora of real estate investors are turning towards the installment sale method in order to defer capital gains tax.
A great deal of real estate investors that are in suffering from a failing 1031 transaction are also turning to the installment sale process in order to save the day. Here is how it works. Instead of selling your investment property directly to a buyer, you actually sell your property to a qualified intermediary buyer. The intermediary buyer than resells the property to your pre-existing buyer or to another party that is part of the transaction. The installment sale method is a legally structured instrument that guarantees a tax deferral to the seller of an investment property when gaining a profit from that sale.
It actually falls within the installment sale contract provisions of the Internal Revenue Service’s (IRS’s) tax code. The proceeds from the sale are distributed to the property seller over time on a payment schedule that is determined by the property seller. Typically speaking, the payments are made on an annual basis. The payments are only taxable once the payment has been made. That means that tax payments are spread out over a long period of time as opposed to being due all at once based on the lump sum proceeds of the sale.
In conclusion, you do not need to take part in a 1031 transaction in order to defer capital gains tax when buying and selling real estate for profit in the state of California. There is a solution that is far more cost effective and a whole lot less stringent. Please contact Tax Deferred Sales today. TDS has specifically developed a proprietary tax expertise structure that is far more effective than a complicated 1031 transaction. Our team of experts specializes in providing customized strategies that delay tax impact. TDS takes great pride in assisting sellers of appreciated assets in deferring the capital gains tax that greatly enhances the ability to grow your net worth.
Our company was founded by a LLM tax attorney with over 20 years tax deferral experience and expertise with a singular focus on assuring sellers delay of taxation.