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Commercial transactions are characterised by their complexity and uniqueness, with no two commercial closings being alike. Our experienced closing team takes pride in our Esquire Land Title Website.docxability to navigate these complexities, showcasing robust problem – solving skills and a tenacious approach.
As part of our Commercial Closing Services, we handle all title issues related to commercial property transactions. This includes managing 1031 Tax Exchanges, 1099-S reporting, and compliance with FIRPTA withholding requirements.
Tax Deferred Exchange
A 1031 Exchange allows investors to defer income tax on capital gains by selling an investment property and acquiring another “like – kind” property, thereby preserving equity and building wealth. Key requirements for a successful 1031 Exchange include not taking “constructive receipt of funds” from the sale and adhering to strict timelines: identifying a replacement property within 45 days and completing the purchase within 180 days from the closing of the relinquished property.
1099 – S Reporting
The Internal Revenue Code mandates that all proceeds from real estate transactions, including those of commercial properties, be reported via Form 1099 – S. This requirement applies to all sellers, including individuals, estates/trusts, partnerships, sole proprietorships, and limited liability companies. Foreign sellers are also required to comply with 1099 – S reporting, irrespective of FIRPTA tax withholdings. Corporations, however, are exempt from 1099 – S reporting.
FIRPTA Withholding
Under the Foreign Investment in Real Property Tax Act (FIRPTA), buyers are required to withhold a tax generally equal to 15% of the total sale price at closing. This tax, along with necessary forms, must be submitted to the IRS within 20 days following the transfer. While all real estate transactions are subject to FIRPTA regulations, many commercial contracts include clauses ensuring the seller’s cooperation in complying with FIRPTA at the closing.
Our team is adept at handling these intricate details, ensuring smooth and compliant commercial real estate transactions