Admin

Basics of a 1031 Exchange

By
Services for Real Estate Pros with Greystone Real Estate Group
Just a few months ago, I began working with Greystone Real Estate Group which specializes in 1031 Exchanges and Tenants In Common.  These real estate techniques are  fascinating to learn about and  safe solutions for people interested in creative alternatives to building wealth.  There is not a more secure way to build wealth than through real estate! Right? For those who have not heard about a 1031 Exchange or those who have heard and are not quite sure what it is, let me explain.

A 1031 exchange, also known as a tax deferred exchange, is a strategy for real estate owners to sell one property and acquire another "like-kind" property deferring capital gains taxes.  The benefit of this strategy is to defer the taxes, leaving the owner with more money to purchase another property.  There are many rules and guidelines that must be followed in order to successfully complete this process.  Here are those guidelines simplified:

  • The Exchanger must use a Qualified Intermediary (QI) to prepare all necessary documentation and to hold the money during the exchange.  It is important that this company be experienced and work full-time with 1031 exchanges.  It is required by the IRS that the QI not be someone that the Exchanger has known or done business with prior to the transaction.
  • The old property (relinquished property) and the new property (replacement property) must be "like-kind" and be used for productive purposes.

 

The Exchanger is given a limited time in which to complete an exchange.  There are two extremely crucial periods.

  • The Identification Period ~ The 45 day period that begins from the transfer of the sold property in which the Exchanger must identify the new property in writing.
  • The Exchange Period ~ The 180 day period that begins from the transfer of the sold property in which the Exchanger must acquire the title to the new property. 
So, that covers the basics for successfully deferring capital gains when selling and purchasing real estate.  For more detailed information on the 1031 Exchange, visit www.greystone1031exchange.com.
Show All Comments Sort:
Jen Hudson
Windermere Real Estate/M2, LLC - Stanwood, WA
Stanwood, Camano & Arlington, WA
Jessica, great summary.  There are so many benefits and misconceptions about 1031s.
Jan 10, 2008 03:49 AM
Jessica Sledge
Greystone Real Estate Group - North Myrtle Beach, SC
 Thanks Jen!  It surprises me how many people don't know about it, epecially in the real estate industry. How have you become familiar with 1031?
Jan 10, 2008 05:40 AM