1031 Tax Deferred Exchange

1031 Tax Deferred Exchange of Real Estate

Did you know that section 1031 of the US Internal Revenue Code allows real estate investors to defer capital gains taxes on the exchange of similar properties? Currently, there are many significant opportunities for §1031 Tax Deferred Exchanges. Let our team of commercial real estate experts begin investigating current available properties for you!

Internal Revenue Code §1031

No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.”

§1031 exchanges provide investors with one of the best tax strategies for preserving the value of an investment portfolio. By using an exchange the investor is able to defer the recognition of capital gain taxes that would otherwise be incurred on the sale of investment property. The investor can then use the entire amount of the equity to purchase substantially more replacement property. To qualify as an exchange the relinquished and replacement properties must be qualified “like-kind” properties and the transaction must be structured as an exchange.

1031 Tax Deferred ExchangePotential properties defined as “like-kind” include property that has been and will be held for productive use in the investor’s trade, investment or business.

  • Agricultural Land
  • Apartments
  • Equipment
  • Hotel
  • Leased Properties
  • Manufacturing
  • Mixed Use
  • Office
  • Residential
  • Retail
  • Tenant in Common (T.I.C.) Properties
  • Vacant Land

The process of an exchange is not necessarily a complex one – but strict adherence to IRS guidelines must be implemented to assure your exchange is qualified. The IRS has specific protocol and timeline requirements and documentation to confirm qualification.

Types of Exchanges

  • Simultaneous
  • Delayed
  • Construction
  • Multi-asset
  • Multi-party
  • Multi-property
  • Reverse

 


 

CALCULATING THE APPROXIMATE CAPITAL GAINS TAX

The gain, from the sale of investment property is subject to the combination of capital gain taxes and the tax on recapture of depreciation. Investors should consult with their tax or legal advisors prior to entering into an exchange. This formula is an approximate guide to estimate the potential capital gain tax.

Download, print and share this document on 1031 Tax Deferred Exchange of Real Estate

 


It is advised that you consult with your accountant / tax advisor for specific review of your particular transaction.

Let our team at APPRO & CERRON get started investigating the great opportunities §1031 Tax Deferred Exchanges may hold for you. Contact us today!