Who is eligible for a 1031 exchange?

Owners of investment and business property can qualify for a Section 1031 deferral, including individuals, C corporations, S corporations, partnerships, LLCs, trusts, and any other taxpaying entity.

What property qualifies for a 1031 exchange?

Both the relinquished and replacement properties must be held for trade, business, or investment use. Personal-use property like a home or vacation home does not qualify. The properties must be like-kind — meaning the same nature or character.

What does a 1031 exchange cost?

WealthBuilder 1031 charges a flat fee of $1,000: $750 invoiced at the closing of the relinquished property, and $250 at the closing of the replacement property.

Do I have to decide before closing to do a 1031 exchange?

Yes. You must retain a Qualified Intermediary before closing on the sale of your relinquished property. If you have already closed without setting up the exchange first, you cannot use a 1031 exchange.

How much time do I have to complete a 1031 exchange?

Two strict deadlines apply: (1) You have 45 days from the sale of your relinquished property to identify potential replacement properties. (2) You must close on the replacement property within 180 days of the sale, or by your tax return due date for that year, whichever comes first.

What does like-kind mean in a 1031 exchange?

Like-kind means the properties are of the same nature or character. For real estate, virtually all investment real property qualifies as like-kind to other investment real estate, regardless of quality or grade. Property in foreign countries does not qualify.

Can I be my own Qualified Intermediary?

No. The IRS requires an independent Qualified Intermediary to facilitate the exchange. You cannot serve as your own QI, and neither can your agent, broker, accountant, attorney, or anyone who has worked for you in those capacities within the previous two years.

All About 1031s

What does a 1031 Exchange Accomplish?

This 1031 exchange guide explains how to exchange one investment property for another and defer capital gains taxes.

Section 1031 of the Internal Revenue Code enables investors and business owners to take advantage of a tremendous vehicle to build wealth and defer tax obligations. By completing a 1031 exchange, the taxpayer can sell investment property, and use all of the equity from the sale to acquire other investment property, without having to immediately pay taxes on the capital gains from the property sold.

A 1031 exchange helps you accomplish what most investors desire – buy new property, build wealth, increase equity, and defer paying capital gains taxes.

Who is Eligible?

Owners of investment and business property – including individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity – can qualify for a Section 1031 deferral.

What Property Qualifies?

Both the relinquished property you sell and the replacement property you buy must meet certain requirements.

Both properties must be held for use in a trade or business or for investment. Property used primarily for personal use, like your home or vacation homes, does not qualify.
The properties exchanged must be “like-kind”.

What Does it Cost?

Our fee for being a Qualified Intermediary is $1,000. $750 is invoiced at the closing of the sale of the first property, and $250 is invoiced at the closing of the purchase of the new property. If multiple properties are purchased, and additional $250 is charged for each.

Can I Do it Myself?

The IRS requires that any taxpayer taking advantage of Section 1031 retain the services of an independent Qualified Intermediary to facilitate the exchange. A Qualified Intermediary, like WealthBuilder 1031, must be hired before the sale of the currently-owned investment property.

The Qualified Intermediary will make sure that the necessary documents are prepared and signed to qualify your transaction for tax deferral. They will also make sure that the IRS-mandated process is followed. Finally, the Qualified Intermediary will hold your sales proceeds between real estate closings in accordance with the IRS rules.

Have a question this 1031 exchange guide didn’t answer? Call us at 888-508-1901.

Types of 1031 Exchanges

No 1031 exchange guide is complete without covering the four exchange structures — here’s how each works.

Simultaneous Exchange

Deferred Exchange

Reverse Exchange

Improvement Exchange

FAQ

There are 2 time limits that apply. First, you have 45 days from the date you sell the relinquished property to identify potential replacement properties.

Second, the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier.

The properties used in a 1031 exchange must be "like-kind."
Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. In personal property exchanges, the rules pertaining to what qualifies as like-kind are more restrictive than the rules pertaining to real property. As an example, cars are not like-kind to trucks.

There are 2 time limits that apply. First, you have 45 days from the date you sell the relinquished property to identify potential replacement properties.

Second, the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier.

Our Summer Webinar Series Tuesdays and 1031s is here! Attend one of our upcoming webinars!

All About 1031s

What does a 1031 Exchange Accomplish?

Who is Eligible?

What Property Qualifies?

What Does it Cost?

Can I Do it Myself?

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Types of 1031 Exchanges

FAQ

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Simultaneous Exchange

Deferred Exchange

Reverse Exchange

Improvement Exchange

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