What is a 1031 Exchange?

A 1031 exchange allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the money in another property of like kind and equal or greater value or within a certain time limit.

Under Section 1031 of the U.S. Internal Revenue Code proceeds from the sale of the property remain taxable. Because of this, you must obtain a qualified intermediary who will hold the proceeds from the sale. The qualified intermediary shouldn’t have a formal relationship with the seller or buyer.

When do you want a 1031 exchange?

If you are seeking a property that has better return aspects.
If you own investment real estate.
If you want to consolidate properties.
If you want to reset the depreciation clock.

Estate Planning

A major benefit of a 1031 exchange is that the tax deferment is taken with you to the grave. When your heirs inherit the property received through a 1031 exchange, then the tax deferment debt is wiped out.

Benefits

The 1031 exchange is a great and flexible option for investors, although it can get complicated at times. The best option is to have professional assistance through each step to make sure everything is done correctly