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Selling real estate? Ask about a 1031 Exchange
When a business sells a building, property or other real estate, it can encounter a large capital gains tax bill. But an IRS rule can reduce the tax burden if sale proceeds are reinvested directly into a similar property. The exchange involves a fairly complex series of events that HAB Bank can help facilitate.
What is a 1031 Exchange?
The number refers to a section of the Internal Revenue Service code. Put simply, if a business owner sells a property and reinvests the proceeds into a replacement property, they can defer any capital gains taxes associated with that sale.
How does the process work?
- Businesses selling and buying property work with a qualified intermediary, such as a Certified Public Accountant with Section 1031 experience, a real estate attorney, or a bank - such as HAB Bank.
- Before the first asset is sold, its owner and the intermediary enter into a agreement in which the intermediary is designated to receive the sale proceeds and hold them throughout the transaction.
- A qualified intermediary - including experts at HAB Bank - may also consult with the business owner on how to remain in compliance with the Internal Revenue Code.
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| Routing Number: 026007362