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Equal or Up

If you’re looking to defer capital gains taxes with a 1031 exchange it is important to know the ins and outs so that you can get the most out of your real estate investing. One rule that every investor would be wise to remember is the “Equal or Up” rule. Equal or up means that if you want to completely defer all of your capital gains taxes there are two things you will need to do valuation wise

1. You must purchase at least as much as you sell. This is the contract price less the closing costs of the net sale but before the mortgage is paid off. In other words your net sales price.

2. You must use all of the proceeds (the amount left after the mortgage is paid out of the net sale) in the next purchase or purchases.

However, if you want to purchase less than what you sold or if you want to take some cash out you may. This will make your exchange a partial exchange. Meaning that the amount you take out or buy down is taxable as gain. The rest remains safely nestled and tax deferred in the exchange.

Can Oil and Gas Be Exchanged With a 1031?

A 1031 is all about exchanging real estate. But what is defined as “real property” by the IRS and various states isn’t limited to just houses and condos. A fun fact, for instance, is that oil and gas can qualify as real estate.

The production of oil and gas involves access to the property that the resources are on and the rights to extract those resources from the land. This means that while the oil and gas are on the property they are treated like real estate and can be exchanged. Mineral, Water rights, and timber function in the same way, though whether they are considered real estate varies from state to state.

The beautiful part of this is that with a 1031 like-kind exchange, oil and gas can exchanged for any other real estate. If you’re tired of collecting royalty payments in cold cold Ohio, why not exchange it for a vacation rental in sunny Florida? A 1031 exchange has the power to free you and broaden your investment portfolio.

Why is the Housing Market Heating up?

The housing market is booming in many parts of the country. According to MarketWatch, buyer traffic across the country has been on the rise. But why are buyers scrambling to buy? The impending possibility of rising mortgage rates has many buyers looking to purchase while they can. Low inventory has led to frenzied buying in many areas where affordable housing is scarce. The 2018 tax reform also helped to set up states like Florida as favorable places to relocate. In fact, 6 of the nation’s fastest growing metro areas are in the Sunshine State. With its favorable tax environment and beautiful weather, it is no mystery as to why many are choosing to flee the cold and relocate in Florida.