1031 Exchange

In real estate, a 1031 exchange is a swap of one investment property for another that allows capital gains taxes to be deferred. The term, which gets its name from IRS code Section 1031, is bandied about by realtors, title companies, investors, and soccer moms. Some people even insist on making it into a verb, as in: “Let’s 1031 that building for another.”

 

IRS Section 1031 has many moving parts that real estate investors must understand before attempting its use. It is important to use a knowledgeable experienced 1031 exchange company.

 

The ability to reinvest all of your proceeds from a sale of commercial property can make a huge difference in your long-term investment strategies. It can provide flexibility in dealing with changing economic conditions and better enable you to take advantage of investment opportunities.

 

 

KEY TAKEAWAYS

  • A 1031 exchange is a swap of properties that are held for business or investment purposes.

  • The properties being exchanged must be considered like-kind in the eyes of the IRS for capital gains taxes to be deferred.

  • If used correctly, there is no limit on how many times or how frequently you can do 1031 exchanges.

  • The rules can apply to a former primary residence under very specific conditions.

  • It is important to use an experienced 1031 company.

 

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