1031 LIKE-KIND EXCHANGE
A 1031 Exchange allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value.
A common problem is finding a replacement property within the first 45 days after the sale of your relinquished property. Additionally, you must complete your 1031 Exchange transaction, which includes the conveyance of title to all of your like-kind replacement properties that you intend to acquire no later than 180th calendar day following the close of the relinquished property sale transaction. To make matters worse, the IRS generally does not allow extensions of this time.
WHEN DO I NEED TO CONSIDER M453?
When an owner prepares to sell a low-basis capital asset, the owner should consider selling the asset – Real property of any kind, stock in a privately held business, partnership interest, personal residence, art or antique collection. (Stocks or securities traded on an established securities market are not eligible for M453)
WHAT DO I GET FROM M453?
Seller walks away with $$$ equivalent to the sale proceeds of the asset disposition less fees. An all-capital-gain installment sale of the asset, with the capital-gains tax deferred for as long as 30 years, with no net tax cost to the seller for that entire period. M453 provides complete freedom for the seller to invest the monetization loan proceeds as the seller chooses.
HOW DOES M453 WORK?
- Seller sells asset to Dealer on an installment contract.
After a seller finds a buyer for the sale of property, a dealer is involved between the two parties to facilitate the monetized installment sale. Like a traditional installment sale, the seller sells property to a third-party dealer in return for a 30-year, interest only installment contract.
- Dealer immediately sells property to buyer.
Dealer then immediately sells the property to the buyer at no mark-up.
- A 3rd party lender issues seller a 30-year, non-recourse, interest only investment business loan.
A 3rd party lender provides the seller with an unsecured loan in the amount of the sale price less fees.
- The lender cannot compel the seller to pay more on the loan than the monies deposited into the seller’s escrow from the dealer
- Guarantee to the seller that the seller will not have to repay the loans from monies other than those from the dealer deposited into the seller’s escrow
- The parties agree that the lender will not write off the loan or report to a credit agency as it is a private loan
- A series of escrows ensure note repayment from installment proceeds in a smooth, low maintenance process
IS M453 LEGAL?
YES, The IRS issued a Memorandum in 2012.
WHO HAS USED M453?
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