Michigan 1031 Exchange Services
Michigan 1031 Exchange Services

In 1990 the IRS developed new rules regarding Deferred Exchanges. Section 1.1031 defined in detail the procedure for turning a real estate sale and purchase type transaction to an exchange. Section 1031 opened up opportunity for real estate owners to make land or property transactions without the penalty of the Capital Gain Tax.

In order to qualify for a 1031, there are guidelines to be met. The properties exchanged must be held either for productive use in a business, trade or for investment. Property held with intention to sell for gain does not qualify under Section 1031. The properties must be of like kind. The replacement property value must be equal or greater than the fair market value of the relinquished property. The owner must use all of their exchange proceeds from the sale of the relinquished property to acquire the replacement property and any debts on the property must be equal as well.

Translation: Apple for and apple, orange for an orange.

Section 1031 is useful for property owners because in a typical real estate sale, the property owner is taxed on any monetary gain they may incur resulting from the sale. However use of Section 1031 will defer the tax on transaction until the newly acquired property sells. Essentially section 1031 leaves the transaction un-taxed and permits a property owner to dispose of one property and acquire another.

BBC Title has professionals on staff to help you in determining if Section 1031 is the right choice for you. The best way for a property owner to navigate through an exchange process is by consulting a qualified intermediary. BBC title can be there for you every step of the way. From legal counsel, to title insurance needs, to 1031 expertise, BBC Title is qualified and set up to assist you in making your real estate transactions smooth and easy.