Real estate investors or individuals who own business real estate may be able to defer their taxes if they choose not to sell their property outright and instead enter into a 1031 exchange agreement, or like-kind exchange, with another owner. Essentially, a 1031 exchange involves swapping one piece of business or investment property for another property owner’s business or investment property.
Anyone who wants to enter into a 1031 exchange of property agreement should understand that they will not only be subject to Oklahoma real estate law provisions, but they will also have to adhere to strict tax laws imposed by the IRS.
There are several requirement for individuals who are interested in deferring the taxes on the sale of one of their properties:
- The properties that are exchanged must be what the IRS considers as like-kind. This means that they are similar in class, character, or nature.
- Residential property is not included. Only investment or commercial property can qualify for a 1031 exchange.
- Securities, money, and other similar items cannot be included in the exchange.
- Strict time limits are imposed on the exchange process.
- IRS reporting requirements must be fulfilled.
One Slight Error Could Be Costly
As long as everything in the above list is properly in place, you can proceed with your 1031 exchange with the other property owner, but there is one more crucial thing that you need to understand. If you make any errors during any aspect of the 1031 exchange process, you can be held liable for penalties, tax liabilities, and interest charges on your exchange. To ensure that you avoid any unnecessary errors that could turn out to be costly, you should contact an Oklahoma real estate attorney who is familiar with real estate law and tax law.
Contact Robert R. Robles, Skilled Oklahoma Real Estate Attorney
At the Law Office of Robert R. Robles, our attorneys have been representing clients who are Oklahoma real estate investors or business owners for over 30 years now. We have worked diligently over the years to handle complex real estate issues, and we take pride in educating our clients about all of their potential legal options.
If you are considering entering into a 1031 agreement with another property owner, you should consult with an Oklahoma real estate attorney to avoid any mistakes that could cost you more than the original taxes would have been. Feel free to contact the office today for a free evaluation of your case at (405) 232-7980.