The 1031 Exchange

The intelligent way for real estate buyers
Section 1031 of the Internal Revenue Code (IRC) offers real estate buyers a golden opportunity by means of significant tax advantage. Section 1031 of the IRC gives a chance to real estate buyers to defer the capital gain taxes that they incur by selling a property. It states, a real property owner can sell his property and then reinvest the proceeds to purchase of like-kind property and defer the capital gain taxes. However, to qualify for 1031 like kind property exchange aka, 1031 tax deferred exchange and gain tax benefits, the transaction has to be done in accordance to the 1031 exchange rules set forth in the tax code and the treasury regulations. Like-kind exchange is considered as one of the best-kept secrets of the Internal Revenue Code.

1031 Like-kind Exchange – is it for YOU?
Yes, if you have a real property that will get you a profit on sale (may be due to property value depreciating for tax purposes or due to appreciation of real estate in fair market value) then you are the ideal person to go in for a 1031 real estate exchange. Section 1031 of the IRC applies to “Property used in taxpayer’s trade or business”, “Property held for investment” and also potentially for “Property used as a vacation home.” In normal circumstances, the exchange can take the form of a direct interchange or the taxpayer may take assistance from a Qualified Intermediary to hold the sale proceeds until the taxpayer directs the Qualified Intermediary to use them to acquire like-kind replacement property. Completing a qualified exchange keeps you in the real estate business and may preserve your capital gains as far as the IRS is concerned.

Under Internal Revenue Code Section 1031, generally no gain or loss is recognized when you exchange business or investment property exclusively for business or investment property of a like-kind. In a like-kind exchange, properties are believed to be of a like-kind if the property acquired is alike in nature and situated in the United States. However, real property in the United States and real property outside the United States are not considered as like-kind properties. Some common examples of 1031 like-kind exchange property include apartments, commercial, condos, duplexes, raw land and rental homes. Although Section 1031 is not applicable to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, or on certain other assets.

Examples of certified 1031 like-kind properties and like-kind exchanges:

-Apartment building for farm/ranch
-Office building for hotel
-Raw land for retail space
-Unimproved property for commercial property

Personal properties of a like class are also considered as like-kind properties. Regardless of whether the properties are improved or unimproved, real properties generally are of like-kind. But, livestock of different sexes are not like-kind properties. In a 1031 Like-Kind exchange you can exchange any real property for any other real property within the United States or its possessions if said properties are held for productive use in trade or business or for investment purposes.

We are willing to assist you in building your equity faster by performing a 1031 exchange instead of completing a traditional sale for your investment property. We provide comprehensive facts about 1031 tax deferred exchange, the role of a Qualified Intermediary or Exchange Accommodator, 1031 Tenants In Common Exchange and 1031 Triple Net Lease Exchange.

There are literally thousands of variations possible in a 1031 Exchange or Starker Exchange. We are glad to consult with you at any time without charge and provide solutions to your queries about any aspect of 1031 exchange. We help you determine the most appropriate investment strategy for your real estate portfolio. We give you a complete step-by-step guide on setting up your 1031 property exchange and also provide latest information and opportunities related to the 1031 exchange. We offer you the protection and insurance you need to complete a 1031 exchange successfully.

This document/post/article is not to be considered as legal advice. Content and information contained herein is subject to changes, modifications, and may contain inaccuracies or out-of-date information. As with any legal matter or other matters of importance, consultation with an attorney or professional is the best course of action.