All About 1031s
What does a 1031 Exchange Accomplish?
A 1031 allows you to exchange one investments property for another and defer the 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?
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?
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.