About Section 1031 Exchanges
Section 1031 of the Internal Revenue Code defers the taxable gain otherwise recognized in a taxable sale of investment or business real estate.
• Permits the exchange of like-kind assets without the recognition of any gain or loss
• Provides deferral of otherwise taxable gain
• Allows investors to redeploy their money while deferring property taxes through selling • a qualified property and then reinvesting the proceeds into a replacement property
• Revenue Ruling 2004-86 provides that a properly structured DST qualifies as replacement property under Section 1031 of the Internal Revenue Code
Potential Benefits of a 1031 Exchange
Requirements of Section 1031:
• Replacement property must be identified in writing within 45 days. Multiple properties may be acquired or identified.
• The replacement property must be acquired by the earlier of 180 days or by the due
• date of the taxpayer’s tax return.
• Any debt on the relinquished property must be offset by equal or greater debt on the
• replacement property. A reduction of debt may be offset by cash from another
• During the exchange, any money or non-like kind property that is received is taxable.
• A qualified intermediary should be used to hold the proceeds of sale.
* All days are calendar days, regardless of whether the day falls on a holiday or weekend.
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