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The 4-1-1 on 1031s
Tax-deferred property exchanges could save you big dollars when you sell your property. But a few missteps can break the deal.
Whenever Kerrville, Texas, rancher David Gregory buys or sells land, he
makes certain his investment real estate contract contains one
important paragraph: wording that enables him to place proceeds into a
1031 tax-deferred exchange. Read more here
Landscapes - Summer 2008 Landscapes is a Tenth Farm Credit District publication
Tax-deferred property exchanges could save you big dollars when you sell your property. But a few missteps can break the deal.
Whenever Kerrville, Texas, rancher David Gregory buys or sells land, he makes certain his investment real estate contract contains one important paragraph: wording that enables him to place proceeds into a 1031 tax-deferred exchange.
The Capital Farm Credit customer and owner of Rod and Gun Resources Inc. is not alone. Rural property sellers in high-appreciation areas, and those who’ve built significant equity, are avoiding long-term capital gains taxes through the IRS Section 1031 exchanges. But, it takes the right planning.
“Just about every one of the contracts we see nowadays is written with a 1031 clause,” says Ronny Johnson, chief appraisal officer with Capital Farm Credit in New Braunfels, a hotbed of recreational property and housing development between San Antonio and Austin.
“With escalating prices, people have a lot of equity. We’ve seen quite
a few old ranching families that are in transition areas surrounding
metropolitan areas,” he says. “They are still trying to farm and ranch,
and as values escalate, they are moving out farther west.”
With a 1031 exchange, those families can sell their valuable property
for a significant profit and reinvest those proceeds in a like-kind
property, with no tax hit. “In these areas farther removed from metro
areas, the price per acre is less and they can buy more acreage,” he
says.
By CHRISTOPHER PERCY COLLIER
Published: May 16, 2008
THE Robert F. Henry Dam near Montgomery, Ala., is a sprawling wall of reinforced concrete with 11 spillway gates that holds back approximately 234,200 acre feet of water, creating the lake called Jones Bluff Reservoir. Its lock, a massive concrete-lined chamber 655 feet by 84 feet, was built to raise and lower bulky barges hauling tons of wood and grain some 200 miles downriver to Mobile Bay.
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