New York Attorney Helps Residents Take Advantage of 1031 Exchanges

When you realize a capital gain on the sale of a property as an individual or business owner, common knowledge and experience would tell you that you should be prepared to pay federal and state capital gains tax on that amount. This will leave you with less money to invest in other properties and assets. A 1031 exchange, when properly completed, can help you keep more of your capital gain, thus enabling you to further expand your business ventures or grow your investment portfolio.

What is a 1031 Exchange?

The term “1031 exchange” derives its name from Section 1031 of the Internal Revenue Code. This section provides that “no gain or loss” is recognized when property that is held for “productive use” in a trade or business or for investment purposes is exchanged for property of “like-kind” to be used for similar purposes. Basically then, a 1031 exchange occurs when a business owner or investor takes the capital gain from the sale of one property and uses it to purchase another property of like-kind. While this may appear simple and straightforward at first blush, these exchanges can present unique challenges and questions:

  • The term “property of like-kind” does not necessarily mean that the properties to be exchanged must be identical in all respects. An attorney who is thoroughly familiar with Section 1031 exchanges can help you look at ways such an exchange can be accomplished without necessarily investing in the exact same type of property that you just sold; and
  • There can still be tax consequences if the property you purchase is less than the capital gains you realized from the sale of the other property. There can also be tax consequences if you choose not to reinvest all of the capital gains realized from the sale of the property.

Contact Mehra Law Group for Help

Section 1031 exchanges can be of great use to business owners and investors, but only when they are done properly. The Mehra Law Group understands 1031 exchanges and will help you determine if such an exchange is a smart move for you. If so, we can help you carry out the sale and acquisition of property as well. Contact us today at (718) 347-6800.