1031 transactions in California can fail despite your best efforts, proper preparation and hours of planning. It happens to seasoned real estate investors as much as it happens to novices. There is a great deal of reasons for this. A plethora of real estate investors fail to abide by the property identification rules, the qualifying purpose rules, and other guidelines that are set froth by the Internal Revenue Service for 1031 exchanges.
The replacement property or properties must be identified within a period of 45 days of the sale of the relinquished property. In addition, the replacement property or properties must be purchased within 180 days of the sale of the relinquished property. There are zero exceptions to this rule, which is why most 1031 transactions fail.
Failing 1031 exchanges are at crisis levels for commercial property owners. Deals in progress on the sale of investment real estate assets are at risk of failing with no options for re-investment.
The current economic shutdown has made scouting properties and performing due diligence almost impossible.
The question that you may be asking yourself at this time is what can be done in regards to saving a failing 1031 transaction when a replacement property or properties are not identified or purchased within the time frame?
Technically speaking, if 1031 transaction fails, the taxpayer owes the capital gains tax. This can financially damage the real estate investor to say the least. In some cases, it can ruin the entire investment.
The good news is that there is actually a far better option than the standard 1031 tax deferred exchange. This is know as a rescue Installment Sale of a failing 1031 exchange or an Installment Sale alternative to a 1031 exchange. It is perfectly legal, and does not have the same restrictions that are imposed under the Internal Revenue Service section 1031 tax laws. That being stated, it truly takes an expert to save a failing 1031 transaction. Each case is different, which means a customized solution is necessary. That is exactly why you need to consult with a professional organization that specializes in saving a failing 1031 transaction in the state of California. Always remember that delaying taxes is better than paying.
If you need help saving a failing 1031 transaction, please contact Tax Deferred Sales today. TDS has specifically developed a proprietary tax expertise Installment Sale structure to save failing 1031 exchange transactions. 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.