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Eminent Domain & 

1033 Exchange

The Government took your property

- What Happens Now?

Now the IRS wants to tax you on the money you received

  • Your Eminent Domain lawyer has done an excellent job and fought hard to win the proper value for your property.
  • But you are not done with the fight.  Now the IRS wants to tax you.
  • Part of the Internal Revenue Code, Section 1033 provides guidance for the deferral of all tax liability and avoid current taxation by reinvesting your conversion proceeds into qualified replacement property.

What is a 1033 Tax Deferred Exchange as it relates to Eminent Domain?

A taxpayer can leverage the exchange to receive similar tax deferral benefits as offered under a 1031 Exchange.  

  • Defer 100% of Federal & State Capital Gains Taxes; as well as depreciation recapture taxes and Obamacare Tax
  • The opportunity to generate Tax Favored Cash Flow/Income
  • The opportunity to build more wealth
  • Diversification of assets
  • Management Relief
  • Estate Planning
  • You can, even Swap ‘til you drop with future 1031 Exchanges

What are the Primary Benefits of a 1033 Exchange that is different than a 1031 Exchange?

  • You don’t have that tight timeline of a 1031 Exchange, you’ll have a more relaxed timeline of 2-3-years.  
    • But don’t fall asleep, the Tax Man is waiting and circling like a shark.
  • A Qualified Intermediary is not required, which allows you to hold the cash until YOU are ready.
  • You can Invest Funds in Short-Term investments before you do the 1033 Exchange. 
    • But if you suffer any losses on those investments, the Tax Man has no heart, you will still owe the taxes.
  • There is a possibility of being able to get Cash Out Tax Free. 
    • This is really cool and at Exclusive Financial Resources we can help you with this.
  • Conclusion

    Losing your real estate due to condemnation stinks, and your attorney fought hard to win you the highest value possible.  However, incurring a tax liability would only make things worse and your fight is not over.  IRC Section 1033 exists to help taxpayers avoid paying taxes due to eminent domain.  Request a copy of our White Paper here and find out what you can do.  Tax implications of any exchange can be significant, and you should always consult a tax professional. 

    If you have any questions regarding 1031 and 1033 exchange guidelines, extensions, or any other exchange related matter please give Exclusive Financial Resources a call or schedule a 15-minute discussion here.