As a Real Estate investor you might have heard about a 1031 Exchange.

What is a 1031 exchange?

1031 exchange is actually named after Section 1031 of the Internal Revenue Code and was created for tax deferred investing. YES tax deferred NOT tax FREE.

The reason for the creation was, to give Real Estate investors a chance to reinvest their gain into another like kind investment. When the replacement property is eventually sold and not part of another 1031 exchange the taxes will have to be paid at that time.

The 1031 has qualification that have to be met, for instance

• net proceeds in an 1031 exchange need to be reinvested into the replacement property
• there is a limited time frame for purchasing the replacement property
• the net proceeds of the sold property need to be held by a Qualified Intermediary or third party and
• the Qualified Intermediary can not be a advisor of any kind to the Investor, like there attorney, Real estate Agent, financial advisor.
• Property can not be used for personal reason of any kind

When you would like to find out more about a 1031 Exchange or any other type of Real Estate investing, please contact us.

Written by Bettina Settles 06/02/2009 ©