The Rules of the 1031 Exchange. But the “rules” for the like-kind 1031 exchange are not something that you can simply look up and understand. They have rather evolved over the years from the statute, the URS Revenue Rulings, and, to a lesser extent, from Private Letter Rulings.
A 1031 exchange represents a simple, strategic method for selling one qualifying property and the subsequent acquisition of another qualifying property within a specific time frame. Although the logistics of selling one property and buying another are virtually identical to any standard sale and purchase scenario, an exchange is different because the entire transaction is memorialized as an ...
If you're an investor considering a 1031 exchange, make sure you understand these rules, since breaking them could leave you on the hook for thousands of dollars in taxes. Like-Kind Exchanges The term "1031 exchange" is a reference to Internal Revenue Code Section 1031 , which defines such exchanges.
Everything has rules and steps, 1031 exchanges are no different. Start with learning the basic rules, then follow the steps to a successful 1031 exchange. Understanding the basic 1031 rules is the first step to a successful exchange.
1031 Exchange » Articles » The Three Basic Rules You Need To Know When Designating A 1031 Property: The Three Basic Rules You Need To Know When Designating A 1031 Property. Identifying replacement property under IRC Section 1031 is a precise exercise.
1031 Tax Exchange Rules—The Basics. Before you open an exchange, know the basic 1031 tax exchange rules. Identify the Right Property. Select potential replacement property using 1 of 3 options: Up to 3 properties of any value; Any number of properties with a combined value of less than 200% of the value of your relinquished property
1031 exchanges, at least as we know them today, have been around since 1991. Most people in the real estate industry have heard of them and seem to have a good working grasp of how they work, and what the requirements are. Occasionally we get calls from someone who has not heard of a 1031 exchange, or has no clue what the rules are. So now would be a good time to do a
Basic Rules on 1031 Exchanges. 1. The Relinquished Property Must Be Qualifying Property. Qualifying property is property (or equipment) held for investment purposes or used in a taxpayer's trade or business. Investment property includes real estate, improved or unimproved, held for investment or income producing purposes.
In the above example, if you were to do a totally tax-deferred exchange, you will defer $95,000 of taxable gain and have $20,250 more to reinvest in real estate. Reinvestment: See the Reinvestment Rules page for dollar requirements when purchasing the replacement property.
1031 Exchange Information and Exchange Basics We believe it is important for our clients to understand the process they are about to go through before they actually begin. For this reason, we offer details about a series of exchange basics on this page and a wealth of other reference materials on our site.