Tightening Skagit County Regulations Pushes Real Estate Investors To 1031 Exchange Lawyer

Why Regulations Have Skagit County Real Estate Investors On Edge

Cities in Washington state have not been shy lately about favoring renters nor trying to keep rent (and property values) down. Seattle, in particular, has become somewhat infamous for such rules over the last decade, sending many investors seeking more secure options in neighboring counties like Snohomish or Skagit, which benefit from the same high demand as the rest of the greater metropolitan area but without quite so many of the rules. Unfortunately, some of those rules are already catching up in Skagit County. For example, last year in Anacortes, which is facing a “housing affordability crisis,” the city banned short-term rentals in mixed-use zones, adding them to the list of residential zones in which they were already banned in 2019. While some investors who got in early enough to already have their license won't have it removed (yet), others will not be so fortunate.

While Skagit County areas like Mount Vernon may still look good to some investors, the tulip fields may not be enough of a draw to deter others who have been burned by renter-favored legislation and regulations further south. For investors looking to move into, or out of, Skagit County, however, a 1031 tax deferred exchange can offer a smooth transition with minimal loss, assuming you can find an experienced lawyer to get it done right.

Skagit County Lawyer Helps Investors Make 1031 Tax-Deferred Exchanges

Under federal tax law, when you sell a property, chances are you will have to pay significant taxes on it. However, an exception exists for real estate if you use the funds from the sale of the first to purchase a similar investment of a “like-kind”. This causes the tax burden to be delayed or deferred until you cash out on the second (and yes, it can be used indefinitely!).

This “like-kind” exchange is often called a 1031 exchange for the IRS tax code that makes it available. While this federal opportunity is, in theory, available to anyone, it is easy to mess it up and end up paying what you owe, or more, in taxes. Instead, you should work with an experienced tax and real estate law firm, like the Gourley Law Group in Washington.

To ensure your exchange is fully eligible, your tax-deferred exchange lawyer will make sure that you:

• Respect The Like-Kind Restriction On 1031 Tax Deferred Exchange

The first requirement for a successful 1031 real estate exchange in Skagit County or anywhere in Washington is making sure that you meet that like-kind descriptor. Fortunately, as long as you are dealing with real estate, this is fairly straightforward.

So long as both the property you are selling and the one you are acquiring in exchange are for “productive use in trade or business, or for investment” (I.R.C. & 1031 (a) (i)) (in other words, not for your personal housing use) and are real property assets, chances are they qualify. The new one must additionally be worth at least as much as the previous one.

Having a lawyer verify, and complete the proper paperwork, is vital, however, as an error could cost you some or all of the tax benefits of the deferred exchange.

• Complete The 1031 Exchange Transaction Within The Eligible Deferred Deadline

The basic 1031 exchange was designed for direct and simultaneous transactions. Fortunately, this has been expanded over the years to allow for a deferred exchange. Under the deferred system, so long as the target for the exchange is identified within 45 days, and the entire exchange (from sale to new purchase) is completed within 180 days, it is valid.

This deadline is not flexible, so to avoid the IRS breathing down your neck or reclaiming taxes you were hoping to avoid, it is best to work with a Skagit County 1031 exchange lawyer throughout the process.

• Work Through A Qualified Intermediary For Full Compliance

The final, though no less important requirement for your 1031 tax-deferred real estate exchange is the need to keep all funds entirely outside your control or ownership throughout the process. The way to do this is to have them be held by a qualified intermediary after the sale and before the purchase of the next process.

One of the biggest advantages of working with a 1031 exchange lawyer like Craig Gourley is that he can act directly as a qualified intermediary. Keeping this key responsibility in-house, with a reputed and experienced lawyer, helps ensure no errors will arise or disputes emerge during the exchange process.

Looking To Get In Or Out Of Skagit County Real Estate? Call A Local 1031 Exchange Attorney

Gourley Law Group | Tax and real estate attorneys ready to help investors escape encroaching regulations with 1031 tax-deferred exchanges.

If you are concerned about the rise of real-estate-investor-hostile regulations in Washington or looking to diversify, consolidate or relocate your real estate investment, a 1031 exchange might just be the right solution for you.

All it takes to get started, whether you have a property inside or outside Skagit County in mind, is to contact our law firm and ask to speak with a 1031 tax exchange lawyer. You can call us directly at  (360) 323-2885 or schedule a consultation online.