1031 Exchange Info

What Is a 1031 Exchange?

You've just sold a piece of investment real estate and, either through depreciation deductions on the property or through an appreciation in value, you now have capital gains tax to pay. Capital gains can be as high as 25%. Section 1031 of the Internal Revenue Code is one of the last great tax shelters. A 1031 Exchange allows you to defer payment of taxes due. As the name suggests, the 1031 Exchange works through the "exchange" of property. As long as you trade up in value and debt, your taxes will be completely deferred. By deferring these taxes, the wise investor is able to

• Increase Cash Flow
• Purchase Different Property
• Diversify Property
• Consolidate Property

For instance, you might sell vacant land, which is not yet producing income, to buy a commercial building which is bringing in rent.

There are a few important rules that you must follow in order to meet the guidelines for a 1031 exchange. As a Certified Exchange Specialist, we can help you complete your exchange smoothly and within the regulations set forth by the IRS.

Just Answer Three Questions

There are three questions you should ask yourself to see if you are a good candidate for a 1031 exchange:

1. Are you selling appreciating investment real estate?
2. Do you intend to purchase new investment real estate of equal or greater value?
3. Would you like to avoid paying capital gains on the sale of that investment real estate?

If you answered yes to the questions above, you are a good candidate for a 1031 exchange. Call our office at 239-333-1031 and we can help you get started today!



5 Facts to Know About a 1031 Exchange

1. Net Selling Price—To avoid the capital gains tax on the sale of your relinquished property, you must spend an amount equal to your net selling price. (NSP = Selling Price less Closing Cost)

2. What Properties Qualifies—All real estate is interchangeable. House=Duplex=Land=Condo=Business Land=30 Year Lease DEED FOR DEED

3. You must use a Qualified Intermediary—The law requires that you use a QI to facilitate your exchange.  Your QI does 3 main things-Prepare Exchange Agreement, Hold Equity after Closing, and Coordinate Exchange with Closing Agent.

4. 45 Day Rule—You have 45 days from the date of sale of the relinquished property to identify 3 replacement properties.

5. 180 Day Rule—You must close on one or more of your identified replacement properties within 180 days after sale of your relinquished property.