Investors should remain aware and review with tax professional about 1031 exchange transactions done at the end of year 2013. Investors may need to file an extension on their Federal tax returns to take advantage of capital gains benefits.
With the spike in commercial real estate activity, especially for single tenant net lease properties, investors should be aware of the tax ramifications of 1031 exchange transactions. If not properly advised, investors can make themselves ineligle for the full benefits of capital gains deferral unless they submit an extension on their April, 15th 2014 filing.
In our office we have worked with numerous new clients entering into the market for the first time along with seasoned investors using 1031 exchanges to acquire new properties. “Investors like this ability to utilize a 1031 to defer their capital gains but they should be fully aware on how it works and what ways to maximize their particular situation” says Dwaine Clarke, President of Clarke & Tinker Net Lease Property Group.
The 1031 exchange status explains that investors have 45 days after the date their property has been officially transferred to
identify a new replacement property. From that point of indentification they have 180 days to complete an exchange or the date of the investor’s federal tax return for the year in which the transfer occured. What confuses most investors and some tax advisors is that “the code doesn’t clarify how to address capital gains deferrals when the full cycle of the transaction runs into the following calendar year.” says Kevin M. Levine, Executive Vice President of Peak 1031 Exchange Inc.
Investors also need to realize that not only you have 180 days between the sale of the initial investment property and the acquisition of the replacement, an extension can be filed allowing six months past the April 15th filing date. Investors are advised to speak with the tax professionals and advisers as well as to be aware of transaction and filing deadlines as well.
Whatever objective you have our goal is to assist you in considering what the best strategy for your particular situation. If you have any questions or would like to discuss your investment strategy feel free to contact us.
Dwaine Clarke is a published author and founder of Clarke & Tinker Net Leased Property Group, a commercial real estate sales and advisory firm located in Connecticut. Connect with Dwaine on Twitter and Linkedin