Bozeman 1031 exchange qualified intermediary at 1031 Property Exchange has been performing tax deferred real estate exchanges in Bozeman for 20 years. They are Bozeman’s only 1031 exchange company.
There is no reason to pay taxes on investment property like rentals, raw land, ranches, multi-family or any other non-residential property. The IRC 1031 provisions allow you to eliminate Federal and State Capital gains, the 3.8% Medicare tax and eliminate depreciation recapture.
A 1031 exchange can save you tens of thousands of dollars and the compound growth of those savings over time is very significant.
The 1031 exchange is a legal provision set forth by the US Supreme Court in 1979 that allows you to defer federal and state capital gain taxes and eliminate depreciation recapture on rental properties.
Federal capital gains can cost you 15% to 20% when you sell, State capital gains in Montana are 6.9% and Montana has the 12th highest combined capital gains tax rate in the U.S. at 31.9%. Plus, if you own rental property and sell without a 1031 exchange you will have to pay back 20% of the value of all the depreciation.
There are a host of rules each exchanger must follow in order to have an exchange that complies with the IRS regulations. First, the property must be held for investment purposes and there are strict limitations on personal use. Second, a qualified escrow must be used to hold funds during the exchange so that the exchanger does not have constructive receipt of their proceeds. Third, there are 45 days to identify replacement property following the sale of the property you are relinquishing and there are 180 total days to complete the exchange to stay inside the IRS safe harbors.
The like-kind provisions of the IRS code have confused more real estate investors and Realtors than any other single rule in history. It DOES NOT mean that you have to buy the same type of property, it only means that if you are selling real estate then you must buy real estate. So, you can go from raw land to multi-family rental property or you could go from a ranch to a commercial shopping mall. All of these are legitimate uses according to the like-kind provisions.
How the property you are selling is legally held in title must be identical when you acquire a new property. So, if a property is held in joint tenancy when it is sold the replacement property must be acquired in the same joint tenancy. This provision holds some real pitfalls for limited liability companies, which are defined by the IRS as partnerships. In order for an exchange to work for partnerships all member must remain the same when a new property is acquired.
At 1031 Property Exchange we have been performing 1031 exchanges in Bozeman for 20 years. We can help you meet the IRS requirements for a legal tax deferred exchange. We can also help you with advanced strategies, like bifurcation, that allow large land owners to separate their residence from larger land holdings thereby taking advantage of both the Section 121 exclusion and the 1031 provision.
Farmers and ranchers can also recognize significant tax benefits from a 1031.
If you would like a free consultation then call Russ Squire at 406-425-2742 or visit us online at bozemanmontana1031exchange.com.