What is a 1031 exchange?

What is a 1031 exchange?

Section 1031 of the Internal Revenue Code allows a taxpayer who owns a property held for investment or used in a business to exchange a relinquished property and defer paying federal, state capital gain taxes and depreciation recapture taxes if the taxpayer acquires a “like-kind” replacement property to be held for investment.  This allows taxpayers to potentially use all of the proceeds from the sale of the relinquishes property to leverage into more valuable property, increase cash flow, diversity into other properties, expand business operations, reduce management or consolidate into one large replacement property.

How long do I have for a 1031 exchange between sales?

You have 180 days between the sale of the relinquished property and the closing of the replacement property.  You must identify the replacement property within 45 days from closing on the sale of the relinquished property.

This is for informational purposes only and not legal advice.  To find a 1031 exchange expert in your are click here.

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By Colleen Craig, SocalMtgPro, TheMortgageNinja

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