The 1031 exchange is a convenient way for corporate and business enterprises to generate more money by developing an environment where they can purchase and sell commercial real estate assets without having to worry about paying tax liabilities. However, such businesses need to be aware that as soon as they finalize their property transactions via such an exchange, the entire profits that they accumulate from their deals become liable to tax. This is because under the provisions of the Internal Revenue Code, these kinds of exchanges are a medium for deferring tax liabilities rather evading them. However, many taxation and real estate experts feel a prudent approach for such businesses would be to complement a 1031 exchange with IRS Section 170 Bargain Sale.
Welfont Group is a prominent commercial brokerage company in Tampa, Florida that specializes in representing and assisting clients who comprise of real estate investors and institutions that government approves as tax-exempt. The proficient real estate and tax experts of this corporate enterprise focus their attention on helping such clients to search for, scrutinize, finance, buy, sell and manage their real estate properties via tax strategies that the IRS approves. Such tax saving strategies includes 1031 exchange along with IRS Section 170 Bargain Sale.
Difference between 1031 Exchange and IRS Section 170 Bargain Sale
The real estate and taxation specialists of this Group emphasize that tax saving strategies of 1031 exchange and IRS Section 170 Bargain Sale are not similar. In 1031 exchange, corporate enterprises have the option to reinvest the monetary consideration that they receive from the sale of their previous commercial real estate property to buy a similar asset. Moreover, these businesses can delay paying their liability for capital gain tax on such transaction. On the other hand, IRS Section 170 Bargain Sale allows such corporate taxpayers to sell such property to a non-profit philanthropic organization that the government recognizes as tax-exempt for a sale value that is less than its current fair market value. Moreover, Internal Revenue Service recognizes the taxes accruing from this sales transaction as a charitable donation, which is not chargeable in the hands of taxpayers. In addition to this, the selling party can use the monetary consideration from this transaction in manner it pleases with any restrictions.
The experts further clarify that the taxpayers need to note that in the case of 1031 exchange they have pay their tax liability on capital gain like any other property sale. The main difference between 1031 exchange and IRS Section 170 Bargain Sale is that in bargain under IRS Section 170 the parties liable to tax can reduce their income tax burden whereas 1031 exchange allows such taxpayers to delay their liability on capital gain tax. Bargain sale which fall under the clauses of IRS Section 170 offers parties to the transaction a price which is equivalent the maximum fair and true market value that they are willing to accept and exchange the real estate asset but not under any compulsion.
The competent experts at Welfont Group are like to benefit from combining their property sale under 1031 exchange with IRS Section 170 Bargain Sale