Last updated on December 8th, 2022 at 12:12 am
In this video, I’m going to give you 8 reasons on why you should not do a 1031 Exchange. That may seem weird since this video is about 1031 exchanges, but there are times when you should not do them.
The first one and the most important one is that your accountant says don’t do it.
And remember, a 1031 Exchange is when you sell one property that’s been held for investment, and buy another property that you’ll hold for investment, or rent out, under certain rules, timetables, and you will not be able to touch the money – it will go from one property to the other. Okay.
Eight reasons not to do a 1031 Exchange on your property that you are selling and that you’ve held for investment.
- Your accountant says no.
Remember, the first thing you do in a 1031 exchange is call your accountant. Find out whether you should do this 1031 Exchange, or you should sell, or not to sell. And make sure you do this before you start, because your accountant knows your taxes. - If it’s your primary residence.
You do not need to use a 1031 Exchange method to sell your primary residence, since you have other tax advantages to do so. - Raw land that’s not increased in value.
Raw land, when it’s not gone up in value, you do not need do an Exchange if there’s no raise in value, or it’s gone down in value. - If you have partnership issues.
Remember that in a 1031 Exchange you are required to have the same tax ID number from one property to another. And that may be very difficult or impossible if you have problems with your partnership. - Huge profits.
If your profit is so high that paying taxes make sense. Ask your accountant. - Bankruptcy.
If you have bankruptcy or legal issues, you cannot do a 1031 Exchange because you cannot buy another property and you cannot get a loan or use your cash. - Inherited property.
If you’ve recently inherited property, there is no reason to do an Exchange that was property not held for investment. - Capital losses.
If you have capital losses that might offset your gain, and there’s no money-saving advantage to doing an Exchange.