Going concern value refers to the value of a property or business as a functioning, ongoing concern, taking into account its potential for generating income. This value is an important factor in determining the value of a property for purposes of a 1031 exchange.
In a 1031 exchange, the replacement property must have a going concern value that is equal to or greater than the value of the property being sold. This requirement is designed to ensure that the exchange will have a neutral or positive impact on the investor’s tax liability.
Tips
- Consider the property’s potential for generating income, including its rental income, expenses, and cash flow.
- Take into account the property’s location, market conditions, and any improvements that may increase its value.
- Consider the overall financial health of the property and its ability to generate consistent, stable income over the long term.
Recommendations
- Work with a qualified intermediary or other professional to determine the going concern value of the property.
- Consider the potential tax implications of the exchange and the impact it may have on your overall financial situation.
- Carefully evaluate the risks and rewards of a 1031 exchange before making a decision, and consider alternative investment strategies if the exchange may not be the best option for your situation.
