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1031 Exchange, Internal Revenue Code Section 1031
Tax-Deferred Exchanges.
The following is taking directly from the Internal
Revenue Services' website Like-Kind Exchanges
Generally, if you exchange business or investment property solely for business or investment property of a like-kind, no gain or loss is recognized under Internal Revenue Code Section 1031. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss is not recognized. Section 1031 does not apply to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, or certain other assets.
Like-Kind PropertyProperties are of like-kind, if they are of the same nature or character, even if they differ in grade or quality. Personal properties of a like class are like-kind properties. However, livestock of different sexes are not like-kind properties. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not like-kind properties.
Real properties generally are of like-kind, regardless of whether the properties are improved or unimproved. However, real property in the United States and real property outside the United States are not like-kind properties.
More From All States 1031 Exchange Facilitators LLC
1031 Exchanges: Internal Revenue Code Section 1031 is a powerful tool for deferring capital gains tax on commercial/investment transactions. It allows taxpayers to exchange real or personal property for new "like-kind" property, while deferring recognition of any capital gains. Read more...
Reverse Exchanges: The flip side of a typical forward exchange, a reverse exchange allows you to buy your replacement property prior to selling your relinquished property. Reverse exchanges are more complex and require careful structuring. Read more...
Construction Exchanges: A construction exchange provides you with the opportunity to build your own replacement property. Construction exchanges can be done in conjunction with a typical forward exchange, or as part of a reverse exchange. Construction exchanges require careful structuring. Read more...
Tenants in Common: Tenant in Common is a form of holding title to real property. It allows the owner/owners to own an undivided fractional interest in the entire property. In addition, it has become the preferred investment vehicle for real property investors who wish to defer capital gains via a 1031 exchange and own real property without the management headaches. Read more...
1031 Exchange Planning Points
1. Consult with your tax advisor and Qualified
1031 exchange Intermediary prior to selling your investment property
for optimal 1031 exchange benefits.
2. Instruct your attorney or real estate broker to insert a 1031 cooperation clause in the purchase and sale agreement. Contact us for sample cooperation language.
3. Pay attention to the 45/180 day deadlines as
failure to observe these timeframes will invalidate your 1031 exchange.
Legitimate Qualified Intermediaries for 1031 exchange will not
backdate documents to accommodate late transactions.
Read more 1031 Exchange Planning Points...
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Additional 1031 Exchange FAQs