1031-Tax Deferred Exchange
Important
Disclaimer: The information provided
here is general. It is not to be construed in any way as tax advice. We
strongly recommend that you consult with an accountant, prior to transacting
a 1031 exchange. Neither Polina/Leon De-Levi or Pacific Union are responsible
for the accuracy of the information below.
What is a 1031 Exchange?
The IRS, under section 1031 allows an owner
of an income or business property to sell such a property and roll over the
capital gain realized from the sale of such property into another property.
The property being purchased must also be an income or business-use
property. The gain on the first property will then roll over into the next
property, which will adjust the basis of that property. Tax will only be due
when the next property is sold, unless another 1031 exchange is performed.
The following requirements must be met to perform a 1031 exchange:
- The properties must be the same type i.e. investment or business use.
- Title cannot transfer directly between seller and buyer. Instead, an
exchange accommodator must be used. There are professional companies who
provide accommodator services for 1031 exchanges.
- The exchange property (the one being purchased) must be identified no
later than 45 days after the close of escrow of the property being sold.
- The exchange property must close escrow no later than 180 days after
the close of escrow of the property being sold.
- Up to three properties may be identified within the initial 45 day
period. The exchanger must close on one of the three properties in order
to transact the exchange.
- The price of the property being purchased must be equal to or greater
than the price of the property being sold. These prices can be adjusted
by applying allowable deductions.
