What is a 1031 exchange? 

This opportunity allows real-estate investors to defer paying capital gains taxes on their sale of an investment property as long as another “like-kind” property is purchased with the profits of the sale. 

When is a 1031 exchange smart?

A 1031 exchange is great for real-estate investors looking to shift their property portfolios without facing immediate capital gains taxes.

The deferred capital gains taxes on the sale are not due until you sell a real estate property without using a 1031 exchange.

Ultimately, the taxes may be deferred indefinitely if the property is held until the investor’s death, at which point the basis may be stepped up for heirs, potentially eliminating these deferred taxes altogether.

What are the requirements of a 1031 exchange?

Both the property sold and the property acquired must be used for business or investment purposes and be of like-kind, although they can differ in grade, quality, or type. 

• The replacement property must be identified within 45 days of the sale of the original property, and the acquisition must be completed within 180 days from the date of sale or by the tax return due date for that year, whichever is earlier. 
• All the proceeds from the sale must be used to purchase the new property, and they must be held by a qualified intermediary during the transaction. 
• Lastly, the total purchase price of the replacement property must be equal to or greater than the total net sales price of the relinquished property to fully defer the capital gains taxes.

Don’t sell investment property without exploring a 1031 exchange first; once the sale happens the opportunity passes. 

Harsin Advanced Tax Planning makes your 1031 exchange easy: we’ll recommend eligible investment properties and handle the administrative work. 

How Can We Help You Through A 1031 Exchange?
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