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Trust
Services
1031
Like Kind-Exchange
Internal
Revenue Code Section 1031 can be a powerful mechanism for
deferring capital gains tax on certain types of investment
transactions. This section allows a taxpayer to exchange
real or personal property for new "like-kind"
property, while deferring any realization of capital gains
for up to 180 days. During the deferral period, the proceeds
of the sale are placed with a Qualified Intermediary. To
qualify for deferral, strict adherence to the provision
is necessary. Therefore, it is critical to select a Qualified
Intermediary that has a thorough understanding of all the
details of the regulations and specialized in this type
of transaction.
Steps
to a successful tax-deferred exchange:
A 1031
Like Kind Exchange is accomplished with the "Consent
of Buyer" form, signed by the buyer to acknowledge
that he (she) is aware that the property being sold is to
be a part of a 1031 exchange for tax purposes.
The
Relinquished Property Contract Assignment is signed by the
Seller and the Bank to appoint the bank as a qualified intermediary.
A qualified intermediary accepts the funds from the sale
of the relinquished property and holds the funds awaiting
payment for the new property.
A Deferred
Exchange Agreement is signed by the Seller and the Bank
to appoint the bank as Trustee over the proceeds from the
sale of property. The Trustee acts upon the instructions
contained in the Deferred Exchange Agreement.
The
Replacement Property Identification form must be completed
and returned to the Trustee within 45 days of completion
of the sale of the relinquished property to identify the
property to be purchased.
The
Exchanger has a total of 180 calendar days from the closing
of the relinquished property, or from their income tax filing
date (including extensions), whichever is earlier, to purchase
"like-kind" replacement properties. The bank,
as Qualified Intermediary, will then remit the funds for
the purchase of the replacement property.
The
Monticello Banking Company will be happy to assist you and
your attorney in the completion of the 1031 Like Kind Exchange.
For
more information contact:
Norman
Martin or Scott Broyles
Monticello Banking Company
475 East Highway 80
Somerset, KY 42501
Phone: (606)451-0388
Fax: (606)451-9150
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