Now is the time to learn more about how you can use the 1031 tax deferred exchange on your Virgin Islands real estate purchase. Find out about the taxes, exchanges, disadvantages, what properties qualify, partial tax free exchange, common exchange situations and how the 1031 tax exchange effects partnerships and seller financing by speaking with a qualified tax deferred Realtor.
Here's how it works - Generally, if you exchange business or investment property solely for business or investment property of a like kind, no gain or loss is recognized under IRS code section 1031. However, if as a part of the exchange you also receive other (not like kind) property or money, a gain is recognized to the extent of the other property and money received, but a loss is not recognized. The Section 1031 does not apply to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness or certain other assets.
How can the 1031 Tax Deferred Exchange Benefit You?
Simple. If you have investment property to exchange you don't have to pay capital gains taxes. According to Section 1031 Tax Deferred Exchange laws "1031 (a) (1) of the Code it provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment."
What exactly does "like Kind" mean?
Many investors believe that they must have exactly the same kind of property in the Virgin Islands for exchange purposes. but as long as both properties are used for investment or business, and are of the same nature or character, you will qualify! For example; a condo can be exchanged for land or a business property can be exchanged for a single family home as long as they are intended for investment or business purposes. Even vacation homes that are used as investments may qualify for the 1031 tax free exchange.
Personal properties of a like class are like kind properties. Livestock of different sexes are not like kind properties. Also personal property used predominantly in the US are personal property used predominantly outside of the US are not like kind properties.