1031 Exchanges Outside Of The United States: Are They Possible?
- Date: 2008-09-10 - Word Count: 343
Share This!
As a real estate investor, you probably are aware of the advantages of a 1031 exchange over outright sale of a property. An exchange defers your capital gains taxes, keeps your money working for you, and helps to build equity and maximize your returns. But 1031 exchanges are allowed not only for the good of the investor; by allowing investors to move their capital to the most advantageous investments, section 1031 stimulates the U.S. economy.
By this logic, it wouldn't make sense to allow 1031 exchanges to be made on properties overseas, and this is indeed prohibited. Section 1031 is at least partially intended to encourage investors to invest in property located in the U.S., both for the sake of the economy and because it can be difficult or impossible for taxes to be collected on foreign property (remember that a tax deferral is more of a loan than a gift, and the IRS expects to collect on this loan in the event that you sell a replacement property outright).
If 1031 exchanges are limited to the U.S. so that the economy will benefit and the IRS will be able to collect capital gains taxes in the future, then you may be wondering what rules apply to U.S. territories such as Guam, the U.S. Virgin Islands, and Puerto Rico. In private letter rulings, the IRS has stated that a Virgin Islands property can only qualify as like-kind in an exchange with a U.S. property if it is income-producing, which is more restrictive than the normal requirements for a like-kind exchange, which merely state that the property must be held for your trade or business or as an investment.
So if you are planning on exchanging a U.S. property for one located outside of the fifty states (plus Washington D.C.), you would be wise to take a second look at the legal precedents involved to ensure that the property will satisfy all like kind requirements, and if you are uncertain, it might be idea good idea to request a private letter ruling on your particular case.
By this logic, it wouldn't make sense to allow 1031 exchanges to be made on properties overseas, and this is indeed prohibited. Section 1031 is at least partially intended to encourage investors to invest in property located in the U.S., both for the sake of the economy and because it can be difficult or impossible for taxes to be collected on foreign property (remember that a tax deferral is more of a loan than a gift, and the IRS expects to collect on this loan in the event that you sell a replacement property outright).
If 1031 exchanges are limited to the U.S. so that the economy will benefit and the IRS will be able to collect capital gains taxes in the future, then you may be wondering what rules apply to U.S. territories such as Guam, the U.S. Virgin Islands, and Puerto Rico. In private letter rulings, the IRS has stated that a Virgin Islands property can only qualify as like-kind in an exchange with a U.S. property if it is income-producing, which is more restrictive than the normal requirements for a like-kind exchange, which merely state that the property must be held for your trade or business or as an investment.
So if you are planning on exchanging a U.S. property for one located outside of the fifty states (plus Washington D.C.), you would be wise to take a second look at the legal precedents involved to ensure that the property will satisfy all like kind requirements, and if you are uncertain, it might be idea good idea to request a private letter ruling on your particular case.
Related Tags: finance, real estate investing, investing, investments, commercial real estate, taxes, finance articles, investors, business law, finance - investment, finance and investing, finance and investment
U.S. property investors can save their money by using a 1031 exchange to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange is similar to an interest free loan from Uncle Sam! Your Article Search Directory : Find in Articles
Recent articles in this category:
- The Secrets to Getting Low Down Payment Car Insurance
Upon purchase of a new car, there is almost always a requirement to buy an auto insurance policy as - The Wisdom Behind Auto Insurance Comparison Quotes
No one in his right mind would not go for a good deal. In fact, everyone is out on their feet and ru - The Benefits of Auto Insurance Comparisons Florida
Insurance can be expensive. This is something everyone knows about especially in the sunny state of - Auto Insurance Florida: The No-Fault Policy
There are different kinds of car insurance offered by a wide range of providers today. Different sta - Finding the Cheapest Auto Insurance Companies
Everyone is asking and searching for the cheapest auto insurance companies available today. Consider - How do You Compare Private Health Insurance Cover in Australia?
Deciding what is the best and most affordable private health insurance cover can be easy if you take - How Payment Protection Insurance Was Mis-Sold
For over six years the issue of Payment Protection Insurance (PPI) and how it was mis-sold to custom - Finding Quotes For Auto Insurance Online
One of the many concerns when you are shopping for auto insurance is being able to get access to quo - How You Can Find the Best Auto Insurance Online
When it comes to renewing your car insurance you are going to quickly discover that there are a numb - Guidelines For Searching For Auto Insurance Online
The internet can be a great source of discounts and values related to auto insurance. However, many
Most viewed articles in this category:
- Trading Forex With Pivot Points
Forex Pivot Point Trading are used today by Forex Traders and are calculated on the previous days mo - Where To Search For Free Grants
Where do you look for free grants? The search must be thorough or it could be an exercise in futilit - The Connection Between High Blood Pressure and Salt
We are a society of Salt Addicts. It cannot be denied. When you look at the things we do and the pla - Tips For Avoiding HYIP Scams
Before knowing about HYIP Scams, refer to the functioning of HYIP or "High Yield Investment Programs - Getting Credit After Bankruptcy
Consumers do not have to live sans credit following a bankruptcy. By following certain steps consume - Tips For Choosing A Credit Card
Are you looking for that perfect credit card? If so, you may be confused about what exactly to look - Cheap Car Insurance For Teens Online
Many elements determine a car insurance policy. Car insurance companies look at the person's age, hi - What Exactly Is Free Grant Money?
You can apply for free grant money from various government agencies. But where exactly does this mon - Small Business Owners Marketing and Customer Service
Marketing can be time-consuming, but it doesn't have to be hugely expensive now, thanks to the Inter - Apply Online For A Credit Card - How To Choose A Card?
The best type of credit card for you will be dependant on how you intend to use the credit card. Are