Wheaton, IL 1031 Exchange Lawyer

Knowledgeable Real Estate Attorney Finding Tax Breaks Through 1031 Exchanges in DuPage County, IL

A 1031 exchange essentially helps you defer capital gains taxes by swapping one real estate property for a similar real estate property that you will use for the same purpose. These exchanges can be an excellent way for real estate investors to limit their current tax obligations, but are highly legally complex and must always be overseen by a skilled attorney. If you are considering making a 1031 exchange, you will need to ensure that you are acting in compliance with the Internal Revenue Service's rules as well as all applicable state and federal laws. Handling a 1031 exchange incorrectly could open you up to tax burdens or future liability. It is important to work with an attorney who is experienced in overseeing 1031 exchanges.

The McCormick Law Firm, LLC has over ten years of legal experience helping real estate investors make 1031 exchanges in accordance with all relevant laws so that the desired tax break can be achieved. We will be with you before, during, and after your transaction to ensure that everything goes as smoothly as possible. Our dedicated DuPage County, IL 1031 exchange attorneys will oversee the entire process from start to finish in order to help you succeed in reaching your goals.

What You Need to Know About 1031 Exchanges

The goal of making a 1031 exchange is to defer capital gains taxes. Real estate investors or commercial property owners can do this by essentially swapping one property for another. A few things you should know about making a 1031 exchange and how a lawyer can help include:

• 1031 exchanges are primarily intended for commercial properties - Only under very specific circumstances can 1031 exchanges be carried out for a property you used as your primary residence, and the loopholes that used to be used for vacation homes are rapidly closing. Nearly all 1031 exchanges involve commercial or investment properties. This may include properties your company owns and uses as a workplace, residential real estate you keep as an investment property, and commercial space you offer for lease.
• Proceeds from a sale must go directly toward purchasing a substitute property - When you sell the property you currently own, all proceeds must go directly into escrow and pass directly from escrow to the seller of the property you are buying. This shows that there is a direct exchange of one real estate property for the next and that you are not keeping any amount of the proceeds for another purpose.
• You must make a like-kind exchange - 1031 exchanges can only be used for like-kind properties. However, the rules describing what is considered a like-kind property are far more liberal than you might think. For example, you could likely exchange a developed and inhabited apartment complex for a lot of undeveloped land. Your attorney will be able to help you verify that the two properties you are swapping meet the legal definition for a like-kind exchange.
• Special rules apply to depreciable property - If you are exchanging a depreciable property, there may be a depreciation recapture profit that can be taxed like ordinary income. If you have claimed depreciation on your current property, the benefit to you is recaptured as income.
• Timing is of the highest importance - 1031 exchanges must operate on a strict timeline. To begin with, once you have sold the old property, you have only 45 days to designate a replacement property. It is often best to have a few options for the replacement property in mind before you commit to selling your old property. Once you close on your old property, you have only 180 days to close on your new property.

Contact a Wheaton, IL 1031 Exchanges Lawyer

The McCormick Law Firm, LLC is committed to helping real estate investors and business owners make the most of their 1031 exchanges. Our highly knowledgeable 1031 attorneys will help you carefully plan out your exchange to ensure that you are meeting all relevant requirements and will be able to reap the tax benefit intended. Contact us at 630-517-8570 for a complimentary consultation.