October 19th, 2022 1:58 PM by Judy Chapman
I recently had a call from a very good friend who was asking about how they could reinvest the funds they had made from selling some land. I asked if they had already closed on the land and she said yes. At that point in time, it is too late to use the 1031 tax exchange to delay any capital gains taxes you would make from the sell of the property. There are specific rules for 1031 Tax Exchange. The process has to be well planned prior to the sell of your property. It takes an attorney who knows how to handle the process. That attorney will advise you on how to proceed. It is almost better to have the property identified that you intend to purchase and maybe have it under contract, because you have only a very short window in which to use the funds before you have to release them for normal treatment. You will eventually have to pay the taxes, but you are simply "kicking the can down the road." The funds from the sell our your property are held in escrow by the attorney's office until you close on your next property. The property you purchase has to be "Like" what you sold. So if you sold a house, buy a house; if you sold land, buy land; if you sold an investment property, buy an investment property. I told my friend I would do a blog on this. Hopefully it will help someone else who is earlier in the process than they were. If you need more information, do the same thing she did, call me. If I have the answer, I will gladly share it. If I don't we will get the info from an attorney.