1031 Exchanges

A 1031 Exchange (Tax Deferred Exchange) Is One of the Most Powerful Tax Deferral Strategies Remaining Available For Taxpayers.  Investors should never have to pay income taxes on the sale of property as long as they reinvest the proceeds in similar or like-kind property using the 1031 Exchange. Overnight rental/investment properties often qualify for such an exchange. Let me put my ten years of experience in helping investors to identify and purchase like-kind properties to work for you today! 

The advantage of a 1031 Exchange is the ability for a taxpayer to sell income, investment or business property and replace it with like- kind replacement property without having to pay federal income taxes on the transaction. The sale of property and subsequent purchase of a replacement property doesn’t work; there must be an exchange which requires the use of a “qualified intermediary”. Section 1031 of the Internal Revenue Code is the basis for tax-deferred exchanges. The IRS issued “safe harbor”   Regulations in 1991 which established approved procedures for exchanges under Code Section 1031.  Prior to the issuance of the Regulations, exchanges were subject to challenge under examination on a variety of issues. Since issuance of the 1991 Regulations, tax-deferred exchanges are easier, less expensive and safer than ever before. Ask me how this investment tool might work for you today!

1031 Time Lines 

1. Identification Period:  Within 45 days of selling the relinquished property you must identify suitable replacement properties.  This 45 day rule is very strict and is not extended should the 45^th day fall on a Saturday, Sunday, or legal holiday
2. Exchange Period:  The replacement property must be received by the taxpayer within the “exchange period”, which ends within the earlier of . . . 180 days after the date on which the taxpayer transfers the property relinquished, or the due date for the taxpayer tax return for the taxable year in which the transfer of the relinquished property occurs.  This 180-day rule is very strict and is not extended if the 180^th day should happen to fall on a Saturday, Sunday, or legal holiday. 

Replacement Property Identification

1. 3-property rule:  You may identify any three properties as possible replacements for your relinquished property. More than 95 % of exchanges use the 3-property rule.
2. 200% Rule:  You may identify any amount of properties as possible replacements for your relinquished property as long as the aggregate value of those properties does not exceed 200% of the value of your relinquished property.
3. 95% exemption:  You may identify any amount of properties as possible replacements for your relinquished property as long as you end up purchasing at least 95% of the aggregate value of all properties identified.