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Unfortunately, if a taxpayer is not able to purchase new property to successfully complete the 1031 Exchange, the taxes associated with the sale of their investment property will be due.
Like-kind exchanges -- when you exchange real property used for business or held as an investment solely for other business or investment property that is the same type or like-kind -- have long been permitted under the Internal Revenue Code.
The tax-deferred like-kind exchange of real property not held primarily for sale under IRC section 1031 still applies for Iowa tax purposes to the same extent it applies for federal tax purposes.
Nontaxable Exchanges - A nontaxable exchange is an exchange in which any gain is not taxed and any loss can not be deducted. If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you exchanged.
A 1031 exchange is a sale followed by a purchase. If your client is completing a 1031 exchange, he or she must purchase a replacement property! As soon as the old property is listed, begin working with your client to identify what he or she wants to buy (location, price range, property type, etc.)
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A 1031 exchange gets its name from Section 1031 of the U.S. Internal Revenue Code, which 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 1031 Exchange is a method of deferring capital gains for owners of real property. The method allows savvy investors to sell a property and use those proceeds to purchase a like-kind property without triggering capital gains.
The property must be a business or investment property, which means that it cant be personal property. Your home wont qualify for a 1031 exchange. However, a single-family rental property that you own could be exchanged for commercial rental property.
Tax-free exchanges refer to those instances enumerated in Section 40(C)(2) of the National Internal Revenue Code (NIRC) of 1997 that are not subject to Income Tax, Capital Gains Tax, Documentary Stamp Tax and/or Value-added Tax, as the case may be.
Why Would Someone Want to do a 1031 Exchange? Investors really like a 1031 exchange because they avoid paying taxes. The more taxes investors pay Uncle Sam, the less cash they have to reinvest.

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