The TIC 1031 Exchange And What It Is.
Oct 30, 2009 Business Tax
When you think about real estate and all of the taxes that can be associated with it, you soon start to take an interest in tax shelters and how to use them. There are many things to learn, but if you would like to keep more of your money and not pay taxes that you do not need to, then you need to learn these things.
The tax shelter of a TIC 1031 exchange is one that a lot of people find helpful. In case you are wondering, TIC stands for tenant in common. In essence, this refers to two or more people owning the same piece of property.
The smaller individual investor tends to prefer a TIC investment because it allows them to invest in larger property that they may not otherwise be able to invest in. This is a great way for them to get in the game on what they see as a wise investment but that they cannot afford to do all themselves.
When someone decides to get into a TIC property there are a lot of advantages. For example in a 1031 TIC there is the opportunity to have a greater investment and greater equity power because of the tax that is deferred. There is also the ability to break up one large investment property into many small ones and geographically diversify your investment.
There are also risks involved with a TIC, like any other investment type. For example, it works as the tax code reads now, but that could change at any point and that may leave you scrambling to figure out how to deal with that. It is also always a concern when you put yourself in a situation where you are reliant on others.
No matter how the 1031 exchange is applied, it can be a life saver to those who are simply trying to switch their investment from one property to another. It is also the legal way to essentially tell the IRS that you are not gaining anything and should not pay taxes on the sale of the investment because you are just reinvesting back into another property.
However, it is best to involve a qualified 1031 person in the process. They can make sure that you get everything done correctly and save you a lot of money and headache in potential mistakes. It is law that you must involve them once you are at the point to sell the original property.
The tax code line number 1031 is all about this type of tax shelter and that is where it got its name. The 1031 exchange has been a great way and a favorite among some to defer the taxes from the sell on property. However, it should not be used to try to cheat the government. If you do this, it could cost you a lot more in the long run.
A TIC 1031 exchange is a nice way for individuals investors to shelter their investment money from unnecessary taxes. However, all kinds of a 1031 exchange are beneficial for investors.
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Tags: Business Tax, investments, tax laws, tax shelter, taxes, Tic 1031 Exchange
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