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1031 Exchange

What is a 1031 Exchange?

Internal Revenue Code (IRC) Section 1031 is a powerful tool that allows investors to swap any investment property for any other investment property without paying a capital gains tax at the time of the transaction. For your exchange to be valid, you must follow specific IRS regulations.

The basic requirements that must be met include:

The properties being exchanged must be of like kind. For example, you may exchange:

The basic requirements that must be met include:

The properties being exchanged must be of like kind. For example, you may exchange:

  • A house for another house (or several houses)

  • A house for commercial real estate land for rental property

  • A strip mall for an office building, any investment property for any other investment property (as long as it is not occupied as your primary residence)

  • You must identify and close on your replacement property within a specific period of time.

  • 100 percent of the proceeds from your current property must be held by a Qualified Intermediary and applied toward your replacement property to get a full tax deferral

  • Your replacement property must be of equal or greater value to the property you have sold to get a full tax deferral.

  • Properties being exchanged must be used for investment. Personal residences are not exchangeable.

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