1031 Exchanges
In the summer of 1990, the I.R.S. ruled on Deferred Exchanges. Section 1.1031 of the Internal Revenue Code states the procedure for turning a sale and purchase type transaction into an exchange.
These rules allow owners of certain types of like kind real and personal property to sell their property and buy other like kind property without paying capital gains tax.
The like kind provision for real property is quite broad, and includes land, rental, and business property. Any of which, can be exchanged for the other. The like kind provision for personal property is more restrictive.
The rule also requires that the "Exchanger" use a safe harbor to hold the proceeds while the exchange was in progress, and spelled out what those safe harbors were.
The only practical safe harbor for most "Exchangers" is a "Qualified Intermediary."
The rules also require certain
time limits and other requirements, all of which you should check with a qualified
intermediary on.
1031 Exchanges can create
win/win transactions for buyers and sellers of real estae. To learn more about 1031 Exchanges contact
our office.