Section 1031 generally allows the seller of an aircraft to exchange, rather than sell, the aircraft (relinquished property), re-invest the proceeds into a new aircraft (replacement property), and to defer all Federal (and sometimes State) capital gains taxes by doing so.
Our affiliated company, 1031 EZ Exchange, offers its services as your Qualified Intermediary in a Section 1031 Tax Free Exchange. Following the simple, yet strict, rules set forth in the Internal Revenue Code (IRC), Section 1031 will convert your taxable sale into a tax-free exchange.
To qualify, the replacement aircraft must be like-kind. Further, both the relinquished aircraft and the replacement aircraft must be used in the exchangers trade or business, or be held for investment. The exchange does not need to be simultaneous. The relinquished aircraft can be sold before or after the replacement aircraft is acquired.
Section 1031 requires that the proceeds from the sale of the relinquished property be held by a Qualified Intermediary. A Qualified Intermediary is a neutral party who holds the proceeds from the sale of the relinquished property and later uses these proceeds to buy the replacement property and transfer the title to the replacement property to you.
Some exchanges can be quite complex and require the advice of your attorney. Others are simple and fall within the safe harbor provisions of Section 1031. In all cases, 1031 EZ Exchange offers its services as your Qualified Intermediary.
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