Real Estate Investment Tools
What is a 1031 Exchange?
Internal Revenue Code (IRC) Section 1031 is one of the last remaining tax loopholes. It is a powerful tool that allows investors to exchange any investment property for any other investment property. For your exchange to be valid, you must follow specific IRS regulations.
Here is an abbreviated list of the regulations:
The properties being exchanged must be of like kind.
For example, you may exchange:
- A house for another house (or several houses)
- A house for commercial real estate land for rental property
- A strip mall for an office building any investment property for any other investment property (as long as it is not occupied as your primary residence)
- You must identify and close on your replacement property within a specific period of time.
- 100% of the proceeds from your current property must be held by a Qualified Intermediary and applied toward your replacement property to get a full tax deferral.
- Your replacement property must be of equal or greater value to the property you have sold to get a full tax deferral.
- Properties being exchanged must be used for investment. Personal residences are not exchangeable
We can refer you to an expert attorney who specializes in that area.