1031 Exchange

Section 1031 of the IRS code lets you sell a property and buy a new property without paying any taxes.

The 1031 exchange process of selling a property and then buying another property are practically identical to any standard sale and buying situation, a "1031 exchange" is unique because the entire transaction is treated as a tax deferred exchange and not just as a simple sale.

Any Real Estate property owner or investor of Real Estate, should consider an exchange when he/she expects to acquire a replacement "like kind" property subsequent to the sale of his existing investment property.

2 Major rules are:

The total purchase price of the replacement "like kind" property must be equal to, or greater than the total net sales price of the relinquished, real estate, property.

All the equity received from the sale, of the relinquished real estate property, must be used to acquire the replacement, "like kind" property.

Two major time frames are:

Identification period. You must find the property you want to buy, have an accepted offer and have opened escrow within 45 days from the day of selling the relinquished property. This 45 days timeline must be followed and is not extendable in any way, even if the 45th day falls on a Saturday, Sunday or legal US holiday.

The Exchange Period:

This is the period within which a person who has sold the relinquished property must receive the replacement property. You must close escrow on the new property within 180 days of selling (closing escrow) on the old property. Again this timeline must be followed and is not extendable in any way, even if the 45th day falls on a Saturday, Sunday or legal US holiday.

The Qualified Intermediary (QI) should be a company that works on a full-time business of facilitating 1031 exchanges. The Qualified Intermediary is responsible for properly filling out the appropriate tax forms for the client.

If you are interested in learning more about a 1031 exchange please Call or email me today!

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