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Cea Legal P.C. | Attorneys At Law

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Legal Guidance For New York City 1031 Exchanges

A 1031 exchange, named after Section 1031 of the Internal Revenue Code, is a powerful tool for reinvesting proceeds from the sale of one property into another without incurring immediate capital gains taxes. As experienced New York lawyers, we help individuals and businesses strategically leverage real estate investments to foster long-term growth and profitability through tax-deferral opportunities.

The seasoned real estate attorneys at Cea Legal P.C. have a deep understanding of New York City’s complex property market. Since 2016, we have assisted clients in structuring tax-efficient transactions, helping to ensure compliance with applicable laws while maximizing investment potential.

How A 1031 Exchange Works

A 1031 exchange involves selling one property (the relinquished property) and reinvesting the proceeds into another property of “like-kind” (the replacement property). This exchange allows for the deferment of capital gains tax, increasing cash flow and providing superior equity build-up compared to stocks and bonds. The IRS mandates that the properties be exchanged for like-kind properties, which are defined as two pieces of real estate that are similar in nature and character.

To qualify for a 1031 exchange, the properties must meet specific requirements. For instance, a replacement property must be purchased within 180 calendar days, and within 45 days of selling the relinquished property, a replacement property has to have been identified. The buyer and purchase must be the same person, and the purchase price and mortgage have to be equal to or greater than the property you just sold.

Advantages Of A 1031 Exchange

A 1031 exchange offers numerous benefits, including:

  • Deferment of capital gains tax, allowing investors to keep more equity for reinvestment
  • Acquiring higher value properties for increased returns
  • Consolidating or diversifying real estate portfolios
  • Reinvesting in properties better aligned with long-term goals
  • Wrapping in closing costs, title fees, broker fees, attorney fees, title insurance, and transfer fees from the sale price, potentially saving 30% to 40% in taxes
  • Flexibility to choose not to be a landlord or to do a partial exchange
  • Option to step-up in basis on inherited property, allowing for tax-free transfer to heirs

Who Benefits from a 1031 Exchange?

This strategy is particularly beneficial for those who:

  • Have to claim over $250,000 per person or $500,000 jointly as a married couple in capital gains.
  • Want to leverage their equity for a higher-value property.
  • Are seeking to diversify or consolidate their real estate portfolio.
  • Want to reinvest in properties better aligned with their long-term goals.

Guidance Tailored To Your Real Estate Goals

Our real estate lawyers provide personalized representation for individuals and businesses navigating 1031 exchanges in New York City’s competitive market. With extensive experience in property acquisitions and investment strategies, we deliver practical solutions tailored to your specific objectives.

To discuss your real estate investment strategy and learn more about 1031 exchanges, contact our office today. Call 212-847-5007 or submit an inquiry through our online contact form to schedule a confidential consultation.