What is a 1031 Exchange?

A 1031 Exchange allows you to defer the taxes from a commercial property sale by reinvesting the proceeds from the sale in “like-kind” property, within the specified time frames, potentially saving you tens of thousands of dollars.

There are two critical deadlines that must be met.

Within 45 days of selling your property you must:

  1. Identify a replacement property in writing to an intermediary, specifying the property you want to acquire.
  2. Identify up to 3 potential properties for the exchange, but you must close on at least 1 of them.

Within 180 days you must close on 1 of the 3 properties you identified if the initial 45 days after selling your commercial property.

·       The countdown to both deadlines begin simultaneously when the sale of your property closes.

  • There isn’t a limit to the number of times you can do an exchange so you only have to pay taxes on the final sale for which you want to realize or cash-out on the gains.
  • If your debt decreases in the exchange, the difference is treated as income and is taxable as is any cash you may have left over after the exchange

Build Wealth

1031 EXCHANGE is a powerful wealth-building tool.  1031 exchange allows an investor to sell a property and reinvest the proceeds from the sale to a similar property, and defer all capital gains taxes. Per the IRC Section 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.”
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