All About 1031s

What does a 1031 Exchange Accomplish?

A 1031 allows you to exchange one investments property for another and defer the capital gains taxes.

Section 1031 of the Internal Revenue Code enables investors and business owners to take advantage of a tremendous vehicle to build wealth and defer tax obligations. By completing a 1031 exchange, the taxpayer can sell investment property, and use all of the equity from the sale to acquire other investment property, without having to immediately pay taxes on the capital gains from the property sold.

A 1031 exchange helps you accomplish what most investors desire – buy new property, build wealth, increase equity, and defer paying capital gains taxes.

Who is Eligible?

Owners of investment and business property – including individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity – can qualify for a Section 1031 deferral.

What Property Qualifies?

Both the relinquished property you sell and the replacement property you buy must meet certain requirements.

Both properties must be held for use in a trade or business or for investment. Property used primarily for personal use, like your home or vacation homes, does not qualify.
The properties exchanged must be “like-kind”.

What Does it Cost?

Our fee for being a Qualified Intermediary is $1,000. $750 is invoiced at the closing of the sale of the first property, and $250 is invoiced at the closing of the purchase of the new property. If multiple properties are purchased, and additional $250 is charged for each.

Can I Do it Myself?

The IRS requires that any taxpayer taking advantage of Section 1031 retain the services of an independent Qualified Intermediary to facilitate the exchange. A Qualified Intermediary, like WealthBuilder 1031, must be hired before the sale of the currently-owned investment property.

The Qualified Intermediary will make sure that the necessary documents are prepared and signed to qualify your transaction for tax deferral. They will also make sure that the IRS-mandated process is followed. Finally, the Qualified Intermediary will hold your sales proceeds between real estate closings in accordance with the IRS rules.

Get Started Today

It is easy to get started on your exchange. You can either call our office directly at 888-508-1901, or you can fill out our Start Your Exchange form.

Start Your Exchange

Types of Exchanges

Simultaneous Exchange

Deferred Exchange

Reverse Exchange

Improvement Exchange

FAQ

There are 2 time limits that apply. First, you have 45 days from the date you sell the relinquished property to identify potential replacement properties.

Second, the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier.

The properties used in a 1031 exchange must be "like-kind."
Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. In personal property exchanges, the rules pertaining to what qualifies as like-kind are more restrictive than the rules pertaining to real property. As an example, cars are not like-kind to trucks.

There are 2 time limits that apply. First, you have 45 days from the date you sell the relinquished property to identify potential replacement properties.

Second, the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier.