1031 Exchanges - Real Estate Technique to Defer Taxes on Investment Property

1031 Exchanges refers to a type of real estate transaction which allows investors to "exchange" like-kind properties while deferring depreciation recapture and capital gains taxes. In order to use this technique real estate investors are required to reinvest 100-percent of the equity into property of equal or greater value.

In order for 1031 Exchanges to be recognized by the Internal Revenue Service, property owners must retain the services of a Qualified Intermediary (QI). QIs handle every aspect of 1031 exchanges including money transfers and legal documentation.

When hiring a Qualified Intermediary, it is crucial to engage in due diligence and make certain the organization or individual possesses necessary skills and experience. One mathematical error could lead to immense penalties and fees imposed by the IRS.

Another crucial stipulation of 1031 Exchanges involves imposed time requirements. The first time requirement is referred to as the "Identification Period" and stipulates investors must identify their replacement property within 45 calendar days.

The second time requirement is referred to as the "Exchange Period." The exchange period commences on the date the relinquished property is transferred to the new owner and expires within 180 calendar days.

Additionally, 1031 exchanges require exchanged properties to be held only for investment purposes. However, this requirement is broadly defined and allows investors to exchange different types of property. For example, investors could exchange land for a commercial warehouse or an apartment complex for a retail shopping center.

Once replacement property is identified and exchanged, it must be titled under the same name as the relinquished property. For example, if relinquished property was titled as John Doe Real Estate Investments, the replacement property must be titled the same. It could not be titled as John Doe or JD Properties.

In addition to real estate, other types of property can be exchanged under 1031 Tax Deferred Exchanges. One of the most common types of property includes equipment used in the investor's business or trade.

1031 Exchanges require investment property to be exchanged for like-kind property. Real estate must be exchanged for real estate and equipment exchanged for equipment. Investors cannot trade real estate for equipment or vice versa.

Personal residences or vacation homes cannot be traded using 1031 Exchanges unless the property is investment real estate and rent is charged. Additionally, 1031 exchanges cannot be used to exchange a partnership interest, stocks, bonds, or inventory.

Investors are not allowed to access equity monies acquired from the sale of relinquished property. Instead the Qualified Intermediary holds all proceeds in a separate account. Once the exchange is completed, the QI prepares documentation linking exchange properties together.

Using 1031 Exchanges, capital gains taxation and depreciation recapture are deferred as long as exchange monies are used to invest in like-kind properties. This tax deferment is similar to receiving an interest-free loan on the taxes that would have been owed for a typical real estate or equipment sale.

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Car Insurance - New Year New Start

With the credit crunch affecting everything from mortgages to credit cards, many consumers will be sitting down and analysing their finances at the start of a new year.

An important aspect of your financial portfolio to consider is your car insurance policy. With car purchases down in 2008 as a result of the credit crunch, many are putting off buying a new car this year because of money worries.

However, there are a few things you can do to help yourself whilst searching for a car insurance quote, you may even save yourself some money in the process:

• Ensure that your vehicle is secure. Parking in a garage or driveway rather than on the street, and fitting some additional security devices - such as alarms, immobilisers and steering locks can help reduce your premium by helping prove to your insurance company that you've taken measures to keep the vehicle safe.
• Try to resist the urge to 'pimp your ride' though. Any modifications you make to the vehicle - be it cosmetic or mechanical - can push up the cost of your premiums as a result of making the vehicle more attractive to thieves.
• Consider the cost of a policy against your vehicle - if you have an older vehicle it could work out cheaper for you to purchase a third party, fire and theft policy rather than a fully comprehensive cover. This will still offer a level of cover, but can be useful in that it can help reduce your monthly outgoings.
• Also consider upping your excess level - by agreeing to pay just that little bit extra in the event of an accident, you can save yourself some money on the policy itself.
• If you are able to, try to pay the policy up front, monthly payments may be useful for keeping track of your motoring finances, but it could work out cheaper for you to pay the policy off in one instalment.
• If you only travel a short distance every day - consider switching to a pay-as-you-drive policy. The less you drive, the less you pay, which could work out cheaper for you in the long run, plus you can keep up to date with payments in much the same way as a mobile phone bill.
• Build up a no-claims bonus by driving safely and carefully. By accumulating a good period of time without claiming, you can save yourself a chunk of cash on your car insurance.

By driving carefully and taking the time to shop around and compare car insurance quotes, you can help to ensure that your vehicle is protected and save some money in the process.

Looking for cheaper car insurance? Search online to compare car insurance quotes to find an insurance policy that suits you and your budget - and remember to drive carefully, it could lead to cheaper premiums.

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