Consulting your Tax Advisor Should be Step 1

Posted by Margo McDonnell | Tue, Jul 24, 2012

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Our tip today is to always discuss your proposed 1031 exchange with your tax advisor before proceeding.  While a 1031 exchange is an excellent tax-deferral strategy, it is not the right strategy for every situation. You and your tax advisor should discuss your short and long-term objectives and determine if the proposed 1031 exchange will help you get there. 

While 1031 CORP. can answer your questions about exchange regulations and procedures, as the Qualified Intermediary (QI) we cannot provide tax or legal advice. More importantly, we only know a very small piece of your overall tax picture so it is impossible to know if a 1031 exchange is the best course of action for you. Your tax advisor will know what the true tax adjusted basis of your property as well as the amount of depreciation you have taken and can estimate what the tax consequences of the sale will be.   

During the exchange process, your tax advisor can be helpful when estimating whether you are replacing the value and equity of the relinquished property in order to maximize your deferral. Although 1031 CORP. cannot provide tax or legal advice, we can raise the red flag if we have concerns and ask to speak with your tax advisor. We can direct your advisor to the section(s) of the regulations and relative tax cases to help you and your advisor decide how to proceed. 

As much as we would like to facilitate a 1031 exchange for everyone, 1031 CORP. does not want to if it is not the right strategy for you but it is always worth looking into.

Learn more about the role of 1031 CORP.

Topics: 1031 exchange; Role of Qualified Intermediary, 1031 CORP.

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