1031 Exchanges

A 1031 Exchange is a transaction in which a taxpayer is allowed to sell one property and buy another in order to defer capital gains tax that would ordinarily arise from the sale of real estate held for investment or business purposes. The transaction is authorized by Section 1031 of the Internal Revenue Code.

How Does it Work

Preferably before you sell your property, you need to consider what type of replacement property will work best for you, and whether or not you want to own a whole or partial interest in a property. Exchange language will go into the contract of the property you are selling and at closing sales proceeds will to go a Qualified Intermediary for a 1031 exchange. The Seller normally has 45 days to identify a “replacement property” and then will complete the 1031 exchange within 180 days of closing on the relinquished property.

Requirements

Section 1031 of the Internal Revenue Code lays out in detail the procedure and requirements for a 1031 exchange. It specifies that the properties must be held for investment or business purposes and that these properties being exchanged must be “like-kind,” referring to the type of property being exchanged (real estate, personal property, etc.) and not its grade or quality. In effect, all investment real estate, whether it is an office building or a vacant lot, can be exchanged to any other piece of investment property.

What We Do

We discuss with you what type of exchange property will best fit your goals. Often this is income producing property, but it can take other directions including investment properties, raw land and ranches. We have extensive knowledge of properties in and around Central Texas; many of which are not listed as being available for sale. Working within the guidelines of a 1031 Exchange, we analyze the market and preview the properties. We work with you and your Accommodator to conduct a timely purchase of the properties, for the best price, and complete the 1031 Exchange.