Take Advantage of Like-Kind Exchanges

Lawyers and Law Firms

Like-kind exchanges are essentially a tax provision. When property is purchased and sold they need to be of like-kind in order to take advantage of a like-kind exchange in Davenport IA area. Essentially this means that any real property that is exchanged must be exchanged for personal property or real property. There are many obvious tax advantages for small businesses and investors, but there also intricacies for such transactions. That’s why it’s important to use legal counsel so that you taking the proper steps when it comes to this type of exchange.

Make Sure You Are Following the Law

When it comes to like-kind exchanges it is important that you are following the law and understand how complete transaction takes place. There is a certain time period that must be followed even though swapping does not have to happen simultaneously. You could sell property during the beginning of the period, and then purchase replacement property at the end of the six-month period. It is important to follow legal counsel when dealing with like-kind exchanges since exchange property that qualifies needs to be identified shortly after a process.

What Is a Qualified Intermediary?

In order to complete a like-kind exchange you need a qualified intermediary. The qualified intermediary holds any money from a first settlement. They are a person who agrees to enter into a written agreement along with a taxpayer in order to acquire property that has been relinquished via the taxpayer, then transfer said property to a purchaser, acquire the replacement property and then they must transfer the replacement property to said taxpayer. A qualified intermediary can be an attorney that you appoint on your behalf. Such an exchange cannot be completed without full cooperation of the particular purchaser of said property. Once you have a complete understanding of a like-kind exchange, as well as a working knowledge of how they are executed, you will be able to maximize your return on investments while also being able to minimize capital gains tax bills.