1031 Exchanges of Real Property

 

Under Section 1031, all real property (as it is defined by state law) is considered “like-kind” with other real property of the same nature or character. The property must be held for investment or productive use in a trade or business.

 

The following are examples of qualified “like-kind” real property exchanges:

  • Raw land for rental property
  • Single family rental for multi-family rental
  • Retail space for motel/hotel
  • Farms/ranch for golf course
  • 30-year leasehold interest for fee simple interest
  • Non-income producing raw land for income-producing rental property

 

The use of a qualified intermediary is the most common method to quickly and easily complete a valid tax-deferred exchange. A Qualified Intermediary (“QI”)  typically holds funds during the course of deferred exchanges.  Facilitating a forward 1031 exchange with a QI requires the following:

  1. You sign a contract to sell an asset(s) to the buyer.
  2. Prior to the property closing, you retain a QI.
  3. At the closing, the exchange funds are wired or a check is sent to QI.
  4. The taxpayer completes the Identification of Replacement Property exhibit and returns it to the QI within the first 45 days after the transfer of the relinquished property.
  5. You have a maximum of 180 days from the transfer date of the relinquished property to acquire any and all replacement properties.
  6. At the closing of the property to be purchased, the QI wires the exchange funds or sends a check to complete the exchange.

 

1031EZ  |  Offices in New York City  |  Phone 347-871-0318  |  info@1031ez.com

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