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info on 1031 exchange

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Income Property Terminology


What is a 1031 Exchange?

A l031 Exchange is a transaction wherein a taxpayer is permitted to exchange one investment property for an additional property by postponing the tax effect of a sale. The transaction is permitted by 1031 of the IRS Tax Code.

The IRS Code actually states as follows "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like kind, which is to be held either for productive use in a trade or business or for investment."

Conditions for a 1031 Exchange

Important Timeframes for a 1031 Exchange - The investor (or exchanger) must comply with the precise forty five- / 180-day rules for an exchange. As soon as the exchanger sells his or her property (surrendered property) they are given 45 days to select another property(s) of equal or greater value. As soon as one is recognized for replacement, the exchanger has 180 days from the day he or she bought their property to acquire the recognized property(s) (or one-hundred thirty-five days from the start of the 45-day interval).

1031 Exchange Like-Kind Property

The investor is obligated to acquire "like-kind" property. This simply means that it should be other qualifying types of real property. For example, the exchanger can put their two-unit property up for sale and buy a industrial property, or they may market for sale a piece of land and purchase a multi-family building. The property simply must fall in the category of being "like-kind."

The 1031 Exchange has been regarded as probably the most powerful wealth building instrument obtainable to taxpayers. It has been a significant part of the successful strategy of numerous financial geniuses and highly skilled real property experts.

Based on the taxpayer's circumstances, the kind of property they let go and the features of the Replacement Property, different facets of the Exchange could become complex. Its completion may turn out to be advanced and consultants ought to be asked in order to defer the gaines properly. This is no easy task for the "DIY" investor. Get in touch with a qualified intermediary






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Using the power of the 1031 Exchange to construct and preserve their riches and property, diversify and merge real property holdings, restructure, create cash flow from investments is the choice of each owner of investment property within the United States.

Individuals who pay their taxes responsibly should by no means need to pay capital gains taxes on the selling of their income producing property in the event that they intend to reinvest the sales proceeds into extra investment property.

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