• What is a 1031 Exchange?
• Benefits of a 1031 Exchange
• Property that Qualifies for a 1031 Exchange
• Five Things to Understand about a 1031 Exchange
• Request more information on 1031 Exchanges

What is a 1031 Exchange?
When you sell real estate you have to pay capital gains tax on the gain from the sale of the property. The gain is caused by either taking depreciation deductions for tax purposes or from the appreciation over time of the property.

The IRS Section 1031 Exchange offers the major exception to defer capital gains tax normally due on the sale. With the 1031 exchange you can sell an investment property or business, and utilize the proceeds in the purchase of a property of equal or greater value without having to pay capital gains tax.

Benefits of a 1031 Exchange
There are several benefits to consider with a 1031 Exchange. For example, you could use the proceeds to buy bare land and construct a building on it, consolidate several properties into one to ease management and put all funds into a more valuable property, take one property and diversify into several properties, and purchase commercial property from residential proceeds.

Property that Qualifies for a 1031 Exchange
To qualify you need to sell property that was held for business or real estate purposes for the purchase of other business or investment property. However, YOU CANNOT sell investment property for the purchase of personal property, as this would not qualify for a tax deferral under section 1031.

Five Things to Understand about a 1031 Exchange

1. To avoid any taxable gain you must reinvest all the Capital gains and purchase property of equal or greater value.
2. From the date that your old/former property CLOSES, you have 45 days to declare one or more properties you will purchase.
3. From the date of CLOSING of your old/former property you have 180 days to CLOSE one or more properties on your 45-day list.
4. The entity that is on the title of the old/former property must remain on the new property title.
5. A qualified intermediary, sometimes known as an Accommodator, can only handle the proceeds from the sale of the old/former property. You cannot personally touch the money nor can a friend, broker, employee, CPA, or attorney to hold the money for you.