What are the basics of a 1031 Exchange?

• The relinquished and replacement property must be “like-kind.”  The tax code defines like-kind as “similar in nature or character, notwithstanding differences in quality or grade”. Real property must be held for investment or held for productive use in a trade or business.
• The replacement property’s purchase price must be equal to or greater than the relinquished property’s net sales price for a full tax deferal.
• All money the exchangor wishes to defer taxes on from the sale of the relinquished property must be used to acquire the replacement property to defer all capital gains taxes.
• The replacement property (or properties) must be identified within 45 days of the relinquished property closing.  The replacement property (or properties) must be acquired within 180 days of close of the relinquished property.
• The titling of the replacement property should be identical to that of the relinquished property.

If you have questions regarding 1031 Exchanges, contact us today.