Does New York recognize 1031 exchanges?

New York's 1031 exchange rules are the same as the 1031 exchange regulations in the rest of the United States. However, there is one exception for investors who are not New York residents when they execute their trade. You will be subject to 7.7% income tax if you sell a New York 1031 trade if you are not a New York resident.

Does 1031 apply to primary residence?

A 1031 exchange is generally limited to investment properties. The 1031 exchange does not typically apply to your primary residence. A second home, which you may live in at times, is not eligible for a 1031 exchange if it isn't treated as an investment property.

When can you not do a 1031 exchange?

The sale or transfer of a primary residence and 'flippers' are two common situations that are not eligible for a 1031 exchange. Both are exempted because of the same reason. The relinquished property must have been used in a trade, business, investment, or other productive activity to qualify for a 1031 exchange.

How long must you hold 1031 property?

If the property is acquired via a 1031 Exchange and later converted to a primary residence, it must be kept for no less than 5 years otherwise the sale will become fully taxable.

Does a mobile home qualify for a 1031 exchange?

Section 1031 states that you must buy real estate if you want to defer the gains from the sale of real estate. As movable properties are not considered real estate, these properties can't be exchanged with permanent property, but they are able to be exchanged with another moveable property.

Why should I hire Sishodia PLLC?

As a boutique law firm, our focus is first and foremost on our clients. We are easily accessible and are able to respond to your questions, as well as broker inquiries very quickly. We have a record of representing high-net-worth individuals, businesses, large lenders, celebrities, and other similar clientele.

How much should I pay for a consultation?

Sishodia PLLC offers a free consultation. We are also able to offer flat fees on some transactions. We do what we can to minimize your costs.

Where is your office located?

Our Manhattan office is located at 600 Third Avenue 2nd Floor, New York, NY 10016. If you'd like to visit us, feel free to do so. We are open from 9 AM to 5 PM from Monday to Saturday and we are closed on Sundays.

Do you have other service areas?

Yes. We also have a law office in Dutchess County. It is located at 7030 U.S. 9, Rhinebeck, NY 12572.

You can call our Manhattan office at (833) 616-4646. You can also send us an email at natalia@sishodialaw.com. Another way is to fill up the contact form on our website at https://sishodia.com/contact-us/

Sishodia PLLC - 1031 Lawyer

A 1031 exchange is one where one investment property is exchanged for another, thereby deferring capital gains. The rules concerning 1031 exchanges can be strict, however. Getting the help of a skilled New York City 1031 lawyer can help prevent mistakes, as well as save time and money. Sishodia PLLC, New York real estate attorney Natalia Sishodia and our skilled 1031 lawyers can guide and advise you if you are interested in taking advantage of a 1031 exchange. To schedule a free consultation, call us today at (833) 616-4646.

What is a 1031 Exchange?

The term 1031 exchange derives from Section 1031 of the U.S. Internal Revenue Code. This tax code allows an owner of a piece of an investment property the ability to refer paying capital gains by exchanging their investment property with one of “like-kind.” In a 1031 exchange, the proceeds from an investment property are reinvested into a different investment property in an exchange instead of a sale/purchase.

Because proceeds from a sale are subject to significant capital gains taxes, instead of the funds from a sale going to the seller, they are transferred to another investment property via an intermediary. That intermediary then transfers them to the seller of a replacement property, thereby transacting an exchange under the rules of Section 1031.

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What is the Purpose of a 1031 Exchange?

A 1031 exchange allows a real estate investor to buy and sell property without being subject to capital gains taxes. These taxes are deferred until the final sale of an exchanged property.

Right now, capital gains taxes are high (22 to 30 percent) and can substantially eat into any profit realized in the sale of an investment property. These taxes may trend even higher in the future.

If you are a real estate investor who is considering purchasing a replacement investment property through a 1031 exchange, real estate lawyer Natalia Sishodia and the experienced New York 1031 attorneys at Sishodia PLLC would be happy to advise and guide you. To schedule a no-cost appointment, call us now at (833) 616-4646.

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Why Would an Investor Want a 1031 Exchange?

Under Section 1031, if the financial investment is similar between properties, but the form of the investment has changed, the rationale is that the taxpayer should not be required to pay taxes on a gain that is immediately reinvested through an exchange of properties.

There are multiple reasons why a real estate investor may want to take advantage of a 1031 exchange.

While their investment grows, the investor will only be required to pay one capital gains tax at the final sale of an exchanged property, typically at a long-term rate. If done correctly, there is no limit to how many times a 1031 exchange can be utilized. At Sishodia PLLC, our skilled 1031 lawyers can help you understand how a 1031 exchange may be advantageous to you. To schedule a free appointment, call us at (833) 616-4646.

What is the Purpose of a 1031 Exchange?

For an investment property, a percentage of the cost is written off each year as depreciation. When the property is sold, the capital gains are based on the property’s net-adjusted value which equals the original price, plus any capital improvements, minus the depreciation.

When a property sells for over its depreciated value, the depreciation recapture is taxed as ordinary income. But special rules apply with the exchange of depreciable property. When depreciable properties are exchanged through a 1031 exchange, a depreciation recapture can be avoided.

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What is Required in a Valid 1031 Exchange?

To get the full benefit of a 1031 exchange, the exchange must meet important guidelines:

The relinquished property and replacement property must be exchanged, not one sold and the other purchased.
The replacement property must be of equal or greater value than that of the relinquished property.
Both properties must be held for use as a business, trade, or another kind of investment.
Both the relinquished and replacement properties must be of “like-kind.” Business property may be exchanged for another type of investment property, but it may not be exchanged for property held for personal use.

If you are considering a 1031 exchange, you should get the assistance of an experienced New York 1031 lawyer. At Sishodia PLLC, real estate lawyer Natalia Sishodia and our team of experienced New York 1031 attorneys can guide you each step of the way to ensure that your exchange properties qualify and you get the important tax benefits of your exchange. To schedule a no-cost consultation, call us today at (833) 616-4646.

Kinds of 1031 Exchanges

Depending on what type of exchange you are making, requirements and timing can vary.

A simultaneous exchange is one where the relinquished property and replacement property are exchanged at the same time.
A delayed exchange is one where there is a gap of time between the transfer of the relinquished property and the acquisition of the replacement property. These must be transacted within 180 days of each other.
A build-to-suit exchange provides for the renovation or construction of the replacement property with proceeds from the exchange. This type of exchange is still subject to the 180-day timeframe. Any improvements completed after that time are considered personal property and may not be considered part of the exchange.
A reverse exchange is when the acquisition of the replacement property takes place before the exchange of the relinquished property. A property for exchange must be identified within 45 days, and the transaction must be completed within 180 days.

While a mortgage is allowed on both sides of the exchange, if the mortgage on the replacement property is less than the mortgage on the relinquished property, that difference must be considered within the parameters of the exchange.

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Who Can Be a Qualified Intermediary in a 1031 Exchange?

A qualified intermediary is a critical player in a 1031 exchange. During the exchange of property, the investors engaged in the exchange cannot, at any time, receive any proceeds directly. All funds will be transferred through a qualified intermediary. The intermediary will collect funds from the sale of the relinquished property and hold it in escrow. These funds will then be used in the purchase of the replacement property.

A qualified intermediary under the IRS code cannot be related to you, or anyone who has acted as an agent on your behalf for the previous two years. While there aren’t any specific licensing or other educational requirements to act as a qualified intermediary, it should be someone who is experienced in 1031 exchanges.

An experienced 1031 lawyer, real estate attorney, real estate agent or broker, investment professional, CPA, or another financial professional can be a good choice as a qualified intermediary. At Sishodia PLLC, founding attorney Natalia Sishodia and our skilled team of 1031 lawyers have extensive experience as qualified intermediaries in 1031 exchanges.

Common Mistakes in Setting up a 1031 Exchange

The IRS has very specific rules concerning 1031 exchanges. Any errors can result in you having to pay capital gains taxes on the relinquished property. When setting up a 1031 exchange, there are some common mistakes that investors make that must be avoided. These include:

An investor wanting to use a 1031 exchange should review all matters with their legal and tax advisors to ensure that qualifications are met, and their objectives will be served through the exchange.

While an investor can make use of 1031 exchanges as good, tax-deferred ways of building wealth, many complexities must be considered. Getting the assistance of a skilled New York 1031 lawyer can help you understand the transaction and stay within the rules.

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A Law Office of Experienced NYC 1031 Attorneys

At Sishodia PLLC, New York City real estate attorney Natalia Sishodia and our team of experienced 1031 lawyers will help you understand how to take advantage of a 1031 exchange and assist you in navigating the exchange to avoid making critical mistakes. We will help analyze the best structure for your exchange, draft and review any agreements and documents, and ensure that your exchange is executed within the applicable tax rules and time constraints. Call us at (833) 616-4646 or contact us on our website to schedule a consultation.

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