Massachusetts 1031 Exchange – What Are the Requirements for a 1031 Exchange in MA?

Hi. Patty Flowers with IPX1031 Exchange, and today I’ll be speaking on 1031 exchanges in Massachusetts.

Section 1031 is a federal tax code, which means you can complete an exchange by selling and buying investment property anywhere in the United States.

This will defer up to one hundred percent of the capital gains taxes state and federal, a huge tax savings which could be upwards of thirty percent of the gains you made on the investment.

However, Massachusetts does have what they call a clawback provision for 1031.

Let’s say you sell your investment property in Massachusetts and exchange into a property in a different state.

The mass state capital gains taxes are deferred in the year that you sell. However, if in the future you sell that out of state investment property you had bought previously and do not participate in another ten thirty one exchange to continue the tax deferral, Massachusetts will be looking for you to pay the state capital gains tax that was due to them from the original sale.

This is referred to as a clawback and it’s actually a great reason to keep exchanging.

No taxes are due on sale and down the line as part of your estate your heirs could potentially receive the full stepped up basis, meaning no capital gains tax would be due.

If you have any questions about this or any other ten thirty one exchange topic, please visit our IPX website, or contact me.

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