1031 Exchanges and Five Common Misconceptions

There remain deep-rooted misconceptions about Section 1031 of the Internal Revenue Code.

1031 Exchanges Common Misconceptions

A 1031 Exchange, also known as a tax-deferred exchange, is a common, fairly straight forward strategy that affords significant tax advantages to commercial property owners. Thanks to IRC § 1031, real estate investors may sell or relinquish certain qualified property, reinvest proceeds from that property and acquire a replacement property, pursuant to certain time limitations and other regulations. To put…

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1031 Exchange Rules

There are several general rules that apply to all 1031 exchanges:

1031 Exchange Rules

The 1031 like-kind tax deferred exchange originates from Section 1031 of the U.S. Internal Revenue Code. This section of the IRS Code allows real estate investors to defer the payment of capital gains tax that would normally be due when real estate is sold (or relinquished) by purchasing another like-kind replacement property. 1031 exchanges are also known as Starker Exchanges,…

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Qualified Intermediaries and Their Role

A Qualified Intermediary is an independent third party who acts on behalf of the exchanger.

A bridge figuratively represents qualified intermediaries

The IRS requires that money generated from the sale of the relinquished property must be held by a qualified intermediary until the replacement property is purchased.  If the investor touches or in any way controls funds used for a 1031 exchange, the exchange will be disallowed by the IRS and tax on the capital gains must be paid. A Qualified…

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Reverse 1031 Exchange Explained

Reverse 1031 exchanges can be quite complex. We will explain the process.

The Reverse 1031 Exchange Explained

Reverse 1031 Exchange – Here is How it Works By following the rules and guidelines in Section 1031 of the Internal Revenue Code, real estate investors and business owners can defer paying capital gains tax by selling real estate property and replacing it with another like-kind property. 1031 tax deferred exchanges generally fall into three categories: delayed, reverse, and build-to-suit….

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