A 1031 exchange allows you to basically roll over the proceeds from a real estate sale to another purchase. Savvy real estate investors can take advantage of 1031 exchanges, but the complexities of the law require you to search for a 1031 exchange attorney near you. Rely on the expertise of Albert Maimone & Associates, P.C., your local 1031 exchange lawyers in Queens, New York, as well as Nassau and Suffolk counties. Call today for a free consultation with experts in 1031 Exchanges.
What Are 1031 Exchanges?
Pronounced “ten thirty-one,” a 1031 exchange is an investing tool that builds your investment portfolio around real estate. The number 1031 refers to the tax-deferred clause in Section 1031 of the US Internal Revenue Code. It states that you may defer paying your taxes on capital gains from real estate ventures provided you meet the eligibility of a “like-kind exchange” criteria. To qualify for a 1031 exchange:
- You must have access to all the proceeds from the real estate sale.
- You have to use that money to purchase of another similar real estate property.
The challenge of implementing a 1031 exchange involves the strict criteria that the IRS dictates. Search for a 1031 exchange attorney near me who has in-depth knowledge of business law, real estate law and 1031 exchanges. The 1031 exchange lawyers from the boutique law firm of Albert Maimone & Associates serve the five NYC boroughs — Queens, Manhattan, Brooklyn, Staten Island and the Bronx — as well as Nassau and Suffolk counties.
What Properties Fall Under the 1031 Exchanges?
A like-kind exchange is usually considered selling one residential property and replacing it with another. Yet the term includes several distinct qualifiers. To accomplish a successful 1031 exchange, partner with a 1031 exchange attorney before you attempt this type of real estate transaction. A few examples of qualified properties include:
- Residential properties. Commonly associated with single family homes, apartments or duplexes, residential units may include rental condominiums and townhomes. If you sell a residential property, you must use the proceeds to by a similar property to qualify for a 1031 exchange.
- Commercial properties. Small-to-medium-sized businesses — such as convenience stores, gas stations, shopping malls, parking lots, golf courses or nursing homes — are eligible for 1031 exchanges. Make sure your 1031 exchange lawyer is well versed in commercial real estate issues, such as commercial landlord/tenant laws.
- Agricultural land. Farm land and ranches, along with mixed-use primary residences on land and timberland, are eligible for 1031 exchanges. In some cases, you may need legal help partitioning real property.
- Conservation easements. Land trusts and conservation easements may also be eligible. You need counsel from a 1031 exchange attorney to navigate the legal hoops involved in this type of transaction.
While your primary residence isn’t eligible for a 1031 exchange, but you may be able to rent a portion of your house and declare the rental proceeds in a 1031 exchange. If this is your plan, get free consultation and a case evaluation with a 1031 exchange attorney from the Albert Maimone & Associates law practice to understand all the challenges involved. This firm has vast experience in dealing with all kinds of 1031 exchanges.
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Are there Different Types of 1031 Exchanges?
The simplest 1031 exchange is the Forward 1031 Exchange, also called the Delayed Exchange, where you sell your old property, collect the proceeds from the sale and then purchase a replacement property. Another type is the Simultaneous 1031 Exchange, where both selling and buying properties takes place on the same day. Your NYC 1031 exchange lawyer may provide borrower representation or become your lender representation or settlement agent.
Most people don’t know about the International 1031 Exchange, which is open to all federal taxpayers, including non-residents. The procedure is so complex that you need to search for a 1031 exchange lawyer near me to handle the details. For savvy real estate investors, there are other forms of 1031 exchanges that require legal finesse, such as:
- Reverse 1031 exchange. In this arrangement, you buy the replacement property first before selling your real estate. Make sure you have a 1031 exchange lawyer for this exchange before you buy the replacement property.
- Improvement 1031 exchange. For this exchange, you put the tax-deferred funds toward repairing, constructing or improving your replacement property. You’ll likely need construction contracts in place.
- Leasehold improvement 1031 exchange. For this to work, you get a third party to buy the replacement property and then lease it back to you. This way you use the sales proceeds to make improvements in the replacement property.
How Does a 1031 Exchange Work?
Eligibility for 1031 exchange starts with your classification. How you’re classified determines what type of 1031 exchange you qualify for. You can be an individual investor or a business entity. If you’re a business, you may be a C corporation, S corporation, general or limited partnership, limited liability company (LLC) or trust. Beside this, you must be aware of clauses such as:
- Assets like stocks, real estate investment trusts (REIT), bonds, other securities or debt, notes, inventory or stock in trade — in addition to partnership interests or certificates of trust — aren’t eligible for 1031 exchange.
- Replacement property may be bought in another state other than New York, as all 50 states plus the US Virgin Islands, Guam and Northern Mariana Islands qualify.
- The market value of the replacement property must be equal or of greater value to the one you’re selling.
- You get only 45 days to find your replacement property and 180 days to buy it.
Hundred percent of the sales proceeds must be used for the replacement property. Although a partial 1031 exchange, where you keep a portion of the proceeds, may be possible. This amount is taxable, unlike the invested amount. These complexities call for an expert 1031 exchange attorney.
Why Consult a 1031 Exchange Lawyer?
The 1031 clause is heavily regulated, and it’s written with hard-to-understand legal jargon. Search for a 1031 exchange agent near me to lay the foundation for successful implementation of the investment rule. A 1031 exchange attorney helps you choose the right like-kind property and prepare the proper documentation. Everything has to be processed in a timely manner.
Hiring an experienced 1031 lawyer from Albert Maimone & Associates allows you to avoid hefty penalties against wrongful classification of properties. Contact these legal experts for a free consultation and a case evaluation within 48 hours. If you’re an investor looking for a dedicated, focused, hands-on attorney, you don’t have to look elsewhere in New York City.