§1031 Exchange
A 1031 exchange allows one property to be sold and the equity transferred to other property without having to pay capital gains tax. This is highly regulated by federal tax law and must be done properly to be effective.
Not all properties qualify for a 1031 and timing is very important. We can help you find the perfect property for your exchange.
A qualified intermediary is required to hold the funds of the sale until a replacement property or properties are found. They also create the exchange documents are make sure tax regulations are followed.
We work closely with 1031 intermediaries to make sure the properties that are purchased qualify for one of the four main types of 1031 exchanges.
Simultaneous §1031 Exchange
A simultaneous §1031 exchange requires that both the relinquished and replacement property close at the same day and time. Even a slight delay caused by the money transfer process or some other hindrance can disqualify the exchange and result in the federal income taxes potentially being owed on the disqualified exchange.
Delayed §1031 Exchanges
Delayed §1031 exchanges are perhaps the most popular because they provide an extended timeframe in which the exchange can be completed. With this type of exchange, the property investor first arranges the sale of their original property and then buys the replacement property afterward.
Reverse or Forward Exchange
A reverse exchange or forward exchange happens in the exact opposite order from a delayed exchange. With this type of exchange, the investor buys a replacement property first through an exchange accommodation titleholder and sells his or her original (or relinquished) property afterwards.
Construction / Improvement §1031 Exchange
This type of exchange allows an investor to make improvements on the replacement property using the equity from the sale of the relinquished property, while a qualified intermediary holds the deed of the property in trust for up to 180 days.