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1031 Exchange for foreign nationals (non Americans)


One of the big tax advantages for real estate investors in the US is the 1031 Exchange: it allows an investor to sell an asset and not pay capital gains tax on the sold asset, provided they use the proceeds from the sale to purchase another asset within 6 months.
The question arises if foreign nationals also qualify for such an advantageous deal. Foreign nationals qualify for a 1031 exchange no matter where they are from - including Canada - provided they are selling US real estate and buying US real estate. 
They save approximately 25-30% in capital gains tax.
There is only one restriction for foreign nationals: the IRS holds 15% in escrow if the sale amount is over $300,000, which is called "firpta" (Foreign Investment in Real Property Tax Act). They receive the amount back when filling their tax return and the tax return to fill out is not a full tax return. Please see this link for more information.
One of the important elements to consider is that the owners of the property have to be tenants in common.
Let's say the LLC buying the property has x members, the individual LLC had to be a tenant in common with x amount of members. Otherwise, if held individually, the individuals have to be tenants in common.
It can be individually set up when you try to sell. For more information, please check out this link.

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