With a 1031 property exchange, not only do you get to put each cent of the money you’re paid in the sale of your property into a reinvestment in property, permitting you to keep growing your portfolio and your revenue, you can also defer a net loss that might happen from the sale of property that you purchased and held for investing purposes.
Defer Loss with 1031 Investments
When you sell a property and it results in a net loss, instinct might have you claim it on your taxes as a loss to lower your tax burden. Occasionally you can defer that loss and come out better financially in the end. This will not be the ideal situation every time. however it can be of benefit in a few cases.
It’s very important to have the sale structured as a 1031 from the beginning. This isn’t something that can be retro-fitted. Once you determine you’ve incurred a net loss, it is too late to begin the process. The composition of a 1031 will need you to defer both a gain and loss, so you must be prepared for either when you begin the process.
Before the close of the sale, you need to be aware about the tax burden it will place on you to do it as a 1031 or as a standard sale. Then you can make an informed decision, so the use of a professional tax advisor is vital.
One Good Reason to Defer a Loss
If you are a one-time financier and don’t have any other net losses carrying over on your returns, then a deferment may not make much sense. If you’ve got other losses that carry forward for a particular number of years to give you a tax break, nevertheless, adding another may mean that you will miss out on the advantages you would have had if it had been your one loss. If you can defer it, then you can get the tax benefits later when other losses have fallen off your return.
You need tax consultants and property pros to help you when you’re buying 1031 investment property or trying to understand the ramifications of tenants-in-common (TIC) property. But you need to also learn as much as you can on your own. Visit 1031investmentopportunity.com today to start your investment education!
