Brief Description of a 1031 Deferred Tax Exchange
Under section 1031 of the Internal Revenue Code, a real property owner
can sell his property and then reinvest the proceeds in ownership
of like-kind property and defer the capital gains taxes. To qualify
as a like-kind exchange, property exchanges must be done in accordance
with the rules set forth in the tax code and in the treasury regulations.
The 1031 exchange can offer significant tax advantages to real estate
buyers. Often overlooked, a 1031 exchange is considered one of the
best-kept secrets in the Internal Revenue Code.
Time Lines of a 1031 exchange?
Identification Period: Within 45 days of selling the relinquished
property you must identify suitable replacement properties. This 45
day rule is very strict and is not extended should the 45th day fall
on a Saturday, Sunday, or legal holiday.
Exchange Period: The replacement property must
be received by the taxpayer within the "exchange period,"
which ends within the earlier of . . . 180 days after the date on
which the taxpayer transfers the property relinquished, or . . . the
due date for the taxpayer tax return for the taxable year in which
the transfer of the relinquished property occurs. This 180-day rule
is very strict and is not extended if the 180th day should happen
to fall on a Saturday, Sunday or legal holiday.
Reverse 1031s are also available.
Contact Your Tax CPA or 1031 Attorney for further details.
Joe Harrison provides this service in Ocean City, MD and can be reached