Redfish 1031 Exchange

Redfish 1031 Exchange Since 2014, Redfish Exchange has been helping investors defer capital gains on the sale of investment property.

Contact Angela Evans, accounting professional, FSU graduate, cofounder and managing member for more information about Redfish Exchange.

Understanding the financial impacts of a 1031 exchange: A 1031 exchange is one of the few techniques available to postpo...
12/30/2024

Understanding the financial impacts of a 1031 exchange:

A 1031 exchange is one of the few techniques available to postpone or potentially eliminate taxes due on the sale of qualifying properties. By deferring the tax, you have more money available to invest in another property. In effect, you receive an interest free loan from the federal government, in the amount you would have paid in taxes. Any gain from depreciation recapture is postponed. You can acquire and dispose of properties to reallocate your investment portfolio without paying tax on any gain.

A 1031 exchange is not an “all or nothing” situation. You may elect to exchange even if you take some money out, but you will be liable for paying the capital gains tax on the amount that is taken out of the exchange proceeds (“boot”).

The general guidelines to follow to defer ALL the taxable gain:

The value of the replacement property must be equal to or greater than the value of the relinquished property.

The equity in the replacement property must be equal to or greater than the equity in the relinquished property.

https://redfishexchange.com/info/f/frequently-answered-questions

The debt on the replacement property must be equal to or greater than the debt on the relinquished property.

All of the net proceeds from the sale of the relinquished property must be used to acquire the replacement property.

Q - When can I take money out of the exchange account?

Once the money is deposited into your exchange escrow, funds can only be withdrawn in accordance with the Regulations. The taxpayer cannot receive any money until the exchange is complete. If you want to receive a portion of the proceeds in cash, this must be done before the funds are deposited with the Qualified Intermediary.

Q - What are the benefits of exchanging v. selling?

When should you contact a 1031 Qualified Intermediary?It is possible to start an exchange the day of closing your sale, ...
12/30/2024

When should you contact a 1031 Qualified Intermediary?

It is possible to start an exchange the day of closing your sale, this increases cost, but waiting until the last minute isn’t a deal breaker. Ideally, a taxpayer engages the QI on the same day they sign a buyer's offer letter.

In order to qualify for tax deferral under IRC § 1031, the taxpayer cannot have actual or constructive receipt of the proceeds from the relinquished property sale during the exchange period. See Treas. Reg. §1.1031(k)-1(f)(1). Constructive receipt occurs when the funds are credited to the taxpayer, set apart for them or otherwise made available so that they may draw on those funds at any time. It is not necessary for the taxpayer to have actual receipt of funds to be in constructive receipt of them. If an investor were to receive an uncashed check with the closing paperwork, this capital would become irreversibly taxable. To prevent actual or constructive receipt, a taxpayer must utilize a “qualified intermediary”, enter into a written exchange agreement that limits the taxpayer’s rights to receive, pledge, borrow, or otherwise obtain the benefits of the proceeds except as provided under section (g)(6) of the Regulations.

In order to qualify for tax deferral under IRC § 1031, the qualified intermediary cannot be the taxpayer’s agent, attorney, accountant, nor can the QI be the taxpayer’s family member, employee, financial connection, or any other authorized agent of the taxpayer. The qualified intermediary must be unbiased third party. Further, the QI cannot offer advice or become involved in any negotiations involving the transaction or in the disclosures between the Seller and Buyer as required by law.

Every closing is unique, but here's how it typically works and who does what.

Do you qualify for a tax deferred like kind exchange? Are you selling an investment or income-producing property and buy...
12/30/2024

Do you qualify for a tax deferred like kind exchange?

Are you selling an investment or income-producing property and
buying a similar replacement of equal or greater value within the next six months? If the answer to this question is yes, you will likely qualify for a tax deferred exchange.

If you are selling investment property and you have a gain, capital gains tax will be due on your upcoming tax return. Internal Revenue Code, Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in property as part of a qualifying real estate exchange.

Primary residences, second homes, "fix'n'flips", speculative "spec" houses, partnership interests, or stocks, bonds, notes,
securities, nor certificates of trust qualify for 1031 exchanges.

Do you qualify for a tax deferred like kind exchange?

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111 N County Highway 393, Ste 202
Santa Rosa Beach, FL
32459

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