EP350: The Immense Power of a 1031 Exchange – Interview with Leonard Spoto
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A 1031 exchange is a powerful tool that allows an individual to save on taxes after the sale of a piece of real estate. Doing so allows the investor to keep more money in their pocket, and defer all capital gains taxes. However, the IRS has set forth stringent rules about how a 1031 exchange must be conducted.
On this episode, Leonard Spoto from Asset Exchange Company is back to share the four basic guidelines of a 1031 exchange, and why this program is so beneficial for real estate investors. We’ll outline the basics of how to qualify, as well as the crucial steps involved in a successful 1031 exchange. Don’t miss episode 350 of Investing in Real Estate!
More About This Show
At Asset Exchange Company, Leonard and his team have worked with thousands of investors to create wealth through real estate. Leonard posits that the 1031 exchange is one of the greatest wealth building tools available to investors. A 1031 exchange allows an investor to defer capital gains taxes on the sale of an investment property by purchasing a new property.
A 1031 exchange allows the investor to keep more money in their pocket, and use it as additional purchasing power on their next transaction. Leonard explains that a 1031 exchange is permitted under section 1031 of the Internal Revenue Code, but there are strict guidelines that must be followed in order to qualify.
First, the properties involved in the exchange must be held for either business or investment purposes. This information is proven by tax returns, including rental income, depreciation records, and intent. It’s important to have this documentation in place in case of an audit.
There are also regulations in place for the new purchase. The new property must meet the reinvestment requirements. This means the new property must be of equal or greater value than the property that was sold.
Additionally, there is a strict timeline that the investor must uphold. The investor has 180 days to complete the exchange. This begins on the day escrow closes on the sale. Leonard explains that it’s important to work with an accommodator, such as his team. You also must reach out to your accommodator before escrow closing.
Finally, the IRS requires that the investor identify their purchasing plans on day 45. The investor must describe the property or properties they are planning to use as the replacement in the exchange.
On today’s show, Leonard is sharing so much more about the power of 1031 exchanges. He’ll share how and when to initiate an exchange, and the benefits of deferring long-term. We’ll talk about timelines, the history of 1031 exchanges, and so much more!
If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.
On this episode you’ll learn:
- What is a like/kind property, and why does it matter?
- What are the rules regarding the replacement property in a 1031 exchange?
- What is the history of the 1031 exchange?
- What are the three D’s of buying real estate?
- And much more!
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