A 1031 exchange, named after section 1031 of the IRS code, offers real estate investors the opportunity to defer capital gain taxes when selling one investment property to purchase another. By meeting specific requirements such as investing all proceeds from the sale and purchasing a like-kind replacement property of equal or greater value, investors can indefinitely defer taxes, allowing them to shift their focus into a new area or different class of real estate without facing a tax burden. This exchange comes with strict rules, including a 45-day identification period and a 180-day completion period, making it necessary for investors to work with a Qualified Intermediary to navigate the complexities of the process. Whether diversifying assets, seeking better returns, or transitioning from managing a property, a 1031 exchange can be a valuable tool for real estate investors looking to optimize their investment portfolio.
You can check Shirin’s video explaining about 1031 Exchange, click here.
Typically when participating in a 1031 exchange, you can choose from four different types of real estate exchanges:
- Simultaneous exchange
- Delayed exchange
- Reverse exchange
- Construction or improvement exchange
Exchanges refer to IRS Code Section 1031, which allows for the tax-deferred disposition and acquisition of investment real estate in which any tax may be deferred to a later date.
Exchangors have 45 calendar days from the close of the sale of their property to identify the replacement property and then 180 days from the close of the sale to acquire replacement.
To learn more about each types, visit The Four Types of Real Estate Exchanges.
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Shirin Rezania Ramos | 858.345.0685 | www.shirinramos.com | Compass, DRE 0203379
