1031 Exchange Properties For Sale
Usually when selling investment properties, you need to pay taxes on the gain from the sale of the property. This gain can be from appreciation or from depreciation deductions. Using a properly structured 1031 Exchange allows an investor to sell a property, to reinvest the proceeds into a new property and to defer all capital gain taxes.
In order to defer fully all capital gain taxes, all exchange proceeds must be reinvested in the acquired property and the acquired property must have the same or greater value.
How can a 1031 Exchange help me?
- If you plan to sell a property and buy another one for business or investment, then a 1031 Exchange allows you to preserve capital.
- A 1031 Exchange can help you increase cash flow from your investment.A 1031 Exchange can also help you consolidate or diversify your real estate holdings.
What types of properties qualify?
Capital gain deferment requires the exchange of like-kind property for other like-kind property.
Rules for 1031 Exchange in a Nutshell
- Old and new properties must both be held for investment or for business.
- The exchanger must have written exchange agreement with Qualified Intermediary(QI) before closing.
- All real estate is like-kind to all other real estate.
- New property must be equal or up in fair market value and in equity.
- Any cash taken out is taxible.
- Person on title of old must be person on title to new.
- OK to exchange multiple old properties for one new property or vice versa. Fractional interests are OK.
- Owner financing handled outside of exchange.
- Related Party transactions have additional requirements.
- Basis of old carried forward into new, with adjustments.
In Forward exchange, the Exchanger must:
- Not receive funds from sale.
- ID new property, in writing, within 45 days.
- Close on new property within 180 days.
In a Reverse exchange, the Exchanger must:
- Not hold title to both properties simultaneously.
- Park either the old or new property with QI.
- QI cannot hold title to either property for more than 180 days.
- ID old property within 45 days if new property is parked.
- Provide funding to purchase new property.