Helpful Info for Buyers and Sellers

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1031 Exchange and 1031 Reverse Exchange

1031 Exchanges aka “Like-Kind or tax differed exchanges” are a tax provision that permits a taxpayer to defer and not pay income taxes on the gain on the sale of real estate investment property. This is provided the taxpayer reinvests the proceeds into similar, “like-kind” property within a certain period of time. The term “like-kind” in a real property transaction refers to the character of the structure, not the use or quality. There are several “rules” that the exchange runs off, if you follow the steps correctly you can save yourself quite a bit of capital gains taxes when the process is done. 

A 1031 Exchange runs off a specific “timeline”. Day 0 is the beginning of the identification period. This begins on the day you close escrow on the property you will be exchanging. The 45 Day Rule allows the taxpayer 45 days from the time of sale of the relinquished property to search and find your new replacement property. This does not mean you have to close escrow on the property, you will be required to have a list of “like-kind” properties written down for approval in a document signed by a qualified intermediatory or have taken the title on the property already by the end of the time period. The party who serves in the role of this qualified intermediary cannot be someone with whom the seller has had a family relationship or business relationship during the previous two years. If a house is not chosen and approved by the end of this 45-day identification period, this will disqualify you from doing a 1031 Exchange. After this, comes the 180-day “Exchange Period” starts. During this time, you are required to invest your funds from the relinquished property into the chosen “like-kind” property. It is required that the sale is closed by the 180th day. In addition, the entire proceeds from the sale are to go towards the purchase of your new investment. If these steps are not followed, then you will not have the ability to defer your capital gains taxes.

3 Property Rule:

The 3 Property Rule states that the replacement property identification can be made for, “three properties without regard to the fair market values of the properties.” 

200% Rule:

This implements those the chosen replacement properties be no more than 200% above the relinquished properties value. This may work best for an investor exchanging for more than one smaller property rather than one property itself.

95% Rule:

While using the 200% Rule it triggers the 95% Rule. This allows the investor to identify an unlimited amount of replacement properties on the condition that they acquire 95% combined value of the targeted properties within the 180-day exchange period.

Reverse 1031 Exchange:

A Reverse 1031 Exchange is another way for an investor to defer capital gains tax. The process is reversed as the relinquished property must be identified within 45 days of the purchase of the replacement property. The relinquished property then must be sold within 180 days of the newly acquired property purchase. You will need an exchange accommodations titleholder (EAT) to hold the title of the replacement property during the exchange. This outlines a Qualified Exchange Accommodation Agreement (QEAA) together for their “replacement property” and outlines the process of the exchange. A qualified intermediary will also need to be chosen to transfer the title of the relinquished property to the new buyer and the title of the replacement property to the investor. The Reverse Exchange requires the sale of the old property to be of equal or lesser value to the new property and “like-kind”.

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“Have known and worked with Beth for many years, and she’s one of the most intelligent, organized, diligent, just plain hardworking people I’ve had the pleasure to work with. She makes a true connection with her clients and they trust her implicitly, for good reason.”

Gail King

“I am writing this recommendation to all considering a property / investment in the Nevada County Area. I am a busy executive in the S.F. South Bay, my wife and I own investment property in Nevada County. Beth Ann is one of the best guides / realtors I’ve ever worked with at acquiring our wish list. We plan to purchase our retirement home and additional investment properties up there and would not consider using anyone else. Beth Ann helped us find our perfect vacation home on a river before it ever hit the market! She listens, searches, finds and represents us like the good friend we consider her to be.”

Ron Bianchini

“I highly recommend Beth Ann. I have worked with numerous real estate agents and never had an agent go above and beyond to such an extent. Her experience and tenacity helped us navigate a very complex and difficult transaction. She kept the selling agent, the bank, and the escrow company all in line and marching in the same direction. She was extremely responsive and always positive during the process. She was able to keep all of us organized and ensured that all the paperwork and financials were delivered on time. I appreciated her professionalism, work ethic, and knowledge.”

Matthew Tanaka

“Our first dealings with Beth Ann were through my wife at her work. She had tracked us down by phone through a series of personal hunches, much like a detective looking for a clue. She had no idea who owned our property but took the initiative to find us. To us, Beth Ann Wilson is probably one of the most remarkable people we have ever met in the sense that, she literally makes things happen. She is not only a dear friend; she is the only person we would trust explicitly in the real estate market. When we were unable financially to make our dream property come true for us, Beth Ann was the only one with the tenacity to make our property someone else’s dream come true for them. She kept us informed not only weekly, but daily, on any roadblocks that would occasionally rear up.

Beth Ann is truly the only one who turned our situation into a win win scenario. We are forever grateful.”

Charles H. Edsall

“We met Beth a year ago due to an act of fate and today we couldn’t be happier we did. Beth has helped us achieve our dream of owning a country property and we could not possibly have done it without her. Sure, any realtor can show a house and push paper to earn their keep or you can risk it and try to buy/sell yourself. But when you have an unconventional situation as we had you need the best and that person is Beth. She worked tirelessly for us, volunteered her time, sweat and support, “baby-sat” inspectors and workmen at the property when we couldn’t be present, even running water samples to the lab and wrangling power access from neighbors who had no reason to help us. She never complained nor asked for a dime to cover her out-of-pocket costs; not gas, not phone calls, nothing!”

Ken Hilton

Jean and I wanted to write this in hopes that Beth would show it to her future prospective Clients. Here are a few of the reasons we are so thankful: Beth is very professional; her interactions are warm and friendly but direct and firm when needed. She has a deep reservoir of wisdom and experience which came to our rescue many times. Her advice on how to handle our problem tenant was invaluable and successful, ending in successfully getting him to move without any major incidents. During the turns in the road on our journey, she was timely in communication and disciplined to officially change documents along. Above all, I honestly believe that Beth’s primary goal was to help us and protect us regardless of what it took. Our sale had to be on the most difficult end of the spectrum, and it took 13 months. Throughout the whole time, her only concern was for our success and well-being. We could not possibly give Beth a stronger recommendation. She is an amazing talent, hard worker, and person of character.

Jim and Jean Randolph

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