Video Transcript
Today I’m going to discuss with you the three different requirements that the state of California has is when you’re doing a 1031 Exchange.
Number one, it’s really important to note that even though the 1031 industry is unregulated at the federal level, the state of California does require the Qualified Intermediaries like us (IPX1031) carry at least a million dollars worth of bond and a million dollars worth of E&O insurance. Now, thankfully, at IPX1031, we carry a one hundred million dollar bond and thirty million dollars of E&O insurance per occurrence.
Number two, if you do not complete a successful 1031 Exchange or if you have money left over at the end of the exchange, the state of California requires that we withhold 3.33% of the leftover funds or of the sales price depending on the set of circumstances That money goes to the California Franchise Tax Board to be used as a credit towards your next year’s taxes.
And number three, it’s important to note that the state of California is one of four states now that has what is referred to as a clawback provision. A clawback provision basically notes that if you do a 1031 Exchange from California into a different state, the state of California requires that you continue to file an informational tax return with them every single year showing that you still own that other property that you bought out of state, because of someday years down the road, you decide to sell that property and cash out, at that point, California comes back and they “claw back” the taxes that were due while you were doing business in the state of California.
For more information, you can visit wwww.ipx1031.com/california and thank you for spenhttp://wwww.ipx1031.com/californiading a few moments of your day with me.
Understanding the California 1031 Exchange Process
If you have any questions about the California 1031 Exchange process or any other 1031 topic, please visit our IPX 1031 CA website at www.ipx1031.com/california or feel free to contact IPX1031. We’re happy to help.
Click to visit California 1031 Exchange page