1031 Tax Exchange

A 1031 Tax Deferred Exchange is an exchange in which capital gains tax deferral is available to real estate owners who sell their investment, rental, business or vacation real estate, and reinvest the net proceeds in other real estate. Real Estate held for these purposes are called “like-kind” or 1031 properties.

Property owners may sell like-kind properties and defer taxes on the sale’s profits by meeting the requirements of Internal Revenue Code (IRC) 1031 exchange. The purpose of the 1031 Exchange is to allow sellers of like-kind property to buy replacement property of like kind within a specific time period and to defer taxes.

Sellers have a maximum of 180 calendar days from the closing of the initial sale to complete the exchange. Within the first 45 days of this period a seller must designate candidate properties and properly identify them to the IRS. A seller may target up to three properties regardless of value or a group of properties with a combined value that does not exceed 200 percent of the value of the initial property sale. The funds in a trust account can be used as earnest money for the designated property once all IRS requirements for a 1031 transaction are met.

If no new properties are identified in the first 45 days or no designated transaction is completed during the full 180 day period, the trust will be liquidated and the sale proceeds will be taxed at the prevailing capital gains rate.

WHO SHOULD CONSIDER A 1031 EXCHANGE?

Anyone who is thinking about selling a business use or investment property should consider doing a 1031 Exchange. An Exchange offers the astute investor an opportunity to reinvest the federal capital gains tax that would normally be handed over to the IRS and put that money to work for himself. You work too hard to simply pay the tax without carefully considering this reinvestment option. Essentially, 1031 Exchanges should be thought of as an interest free loan from the IRS; one in which the principal may be increased through subsequent exchanges and may never require repayment, if you plan properly.

We are a significant force in facilitating 1031 Exchange transactions, nationwide. Our long-term relationships with owners and investors of every major property type in 34 markets, allows us to match properties and exchange buyers with speed and efficiency. Because of our singular concentration in investments and national reach, we have created a unique system resulting in one of the highest exchange transaction volumes in the nation. As a subset of our national inventory system, a database of exchange opportunities is maintained by each office, offering up-to-date investment opportunities.

If you are currently involved in a 1031 Exchange and need to find your upleg or go to The Internal Revenue Service web site.