A 1031 Exchange, also known as a like-kind exchange, allows investors to defer paying capital gains taxes on an investment property when it is sold, as long as another similar property is purchased with the profit gained by the sale.
Property investors, business owners, and anyone owning investment real estate can potentially qualify for a 1031 Exchange to defer capital gains taxes.
There are two critical deadlines in a 1031 Exchange: 45 days to identify potential replacement properties and a total of 180 days from the sale of the original property to close on a new property.
No, a primary residence does not qualify for a 1031 Exchange as the rule applies only to investment and business properties.
Like-kind" refers to the nature or character of the property rather than its grade or quality, meaning most real estate properties are considered like-kind to other real estate properties.
A Reverse Exchange is a tax deferral strategy where you acquire a new property before selling the old one, allowing for more flexibility in handling investment timing.
If no property is identified within the 45-day period, the 1031 Exchange fails, and capital gains taxes on the sale are due.
There are no limits on the number of 1031 Exchanges you can perform. However, frequent exchanges can draw IRS scrutiny to ensure transactions are legitimate.
A Deferred Sales Trust (DST) allows you to defer taxes by selling your property to a trust, which then pays you over time, spreading out your tax liabilities.
It's crucial to work with a qualified intermediary who understands the complexities of 1031 Exchanges and IRS requirements to ensure that your transaction is fully compliant.
