1031 Exchange

As you may know, a 1031 Tax Deferred Exchange is thought by many to be one of the more powerful tax deferral tools currently available. Under the Internal Revenue Code Section 1031, taxpayers may be able to defer the capital gains tax on the sale of appreciated investment property if they reinvest the proceeds in “like-kind” property. 

Almost any property that is held for business or investment purposes may qualify as “like-kind” including apartments, single-family rentals, land, office, industrial, storage and healthcare properties, among others.

Requirements for a Successful 1031 Exchange:

• Prior to sale of property; mandatory to engage a qualified intermediary (QI)

• Client has 45 days from the date of sale to identify replacement property(s)

• Client has 180 days from the sale of their relinquished property to close on their replacement property(s)

• In addition to the timing considerations, a successful 1031 Exchange also requires:

  • replacement property must be of equal or greater value to relinquished property

  • in order to have 100% tax deferral, a client needs to reinvest all proceeds from sale of relinquished property

  • a client is required to obtain equal or greater level of debt on the replacement property(s)