Hi, I'm a CPA who should meet your criteria. I'm located in the DFW area (Southwest Arlington) and reasonably familiar with 1031 exchanges.
I'll attempt to give you an overview of these rules, but keep in mind that these are general comments that may not apply to your situation, and is intended for a general audience. I will be happy to meet with you in person for more specific advice tailored to your needs.
Generally speaking, when using a 1031 exchange, you have to trade up into larger, more expensive properties in order to totally avoid tax, and these transactions may not permanently avoid tax because your cost basis in the newly acquired property is adjusted lower for any gain that you avoided on the disposition of the first property. It is possible to keep deferring tax through several 1031 transactions as long as you keep trading up, but if ever sell one of the properties that you avoided tax on earlier, the accumulated gain from the previous transactions may be triggered. When the basis is lowered, it also lowers future depreciation deductions.
The use of this technique is generally used when there is a large capital gain to defer, because the cost of doing this type of transaction is higher than the usual sale. Another factor is the relatively low capital gains rates in recent years. If it's a relatively small gain, many investors have simply opted to pay the tax rather than incur the cost and restrictions associated with doing a 1031 exchange.
There is a relatively short window of time in which to locate and close on the replacement property. 1031's generally work best when a replacement property is located first, and you are trying to raise funds to finance the acquisition. You can then sell a previously owned property, and have the proceeds apply to the acquired property, without having to pay tax on the sale of the previous property. You also need to make sure the people on the other side of your transactions are aware you are doing a 1031 exchange, and agree to cooperate with it, because sometimes closings can be delayed. It is not that common for the buyer and seller to each want each other's properties, so often there is a time lag looking for a third party buyer to come into the exchange.
Finally, be sure you get professional advice, and use a title company familiar with these transactions. These closing agents are commonly called "intermediaries", and please make sure any cash received is held by the intermediary and does not go through your hands, or you will get taxed.
For more assistance, I'll be happy to focus my attention on your particular needs. We provide an initial 1/2 hour consultation at no charge.
Call 817-563-7717 or email me at don@mccartneycpa.com
