1031 Exchange, Just Do It

1031 Exchange


The illusive 1031 exchange is not a secret government conspiracy. It’s not just for the wealthy and it’s not something we can’t figure out and take advantage of. According to Realty Exchangers, Inc it’s actually very simple.

Picture this, its summer 1990 you’re riding around with the top down enjoying the cool breeze on your face. You can feel the excitement in the air as the I.R.S. finally releases the long awaited Rules of Deferred Exchanges. Section 1.1031 spells out the process by which the owners of business and investment properties can sell their property and buy another like it without paying Capital Gains Tax.

The basic rules are as follows:

1) The property must be “like kind,” meaning have the same use or of the same nature. It doesn’t have to be the same grade or quality.
2) The exchanger must use a third party, known as a safe harbor, to hold proceeds while the exchange is in process.
3) The most practical safe harbor is a qualified intermediary.
4) Time limits must be upheld.

Although there are a great many details involved in such a transaction, don’t let that get you down. You’ll find lots of help along the way.