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1031 Tax Exchange

Nov. 10, 2022

A 1031 Tax Exchange is a structuring of a real estate transaction according to IRS rules and regulations which allows you to defer capital gains taxes at the time of sale. There are many rules and regulations pertaining to 1031 Tax Exchanges. As a real estate Attorney, I have handled many of them over the years and they have proved to be very beneficial to my clients. There are a myriad of types of 1031 transactions in order to fit your personal needs at the time of the sale.

Basically, the most typical and straight forward form of 1031 Exchange is there the sale proceeds from your first transaction are rolled into, or utilized, for the purchase of your second " like-kind exchange,"  At the time of the first sale, your funds go to a qualified intermediary who holds same until your second closing.  You cannot have access to any of the funds or you will be taxed upon same.  Some clients choose to do it in this fashion, wherein, they pocket some of the funds from the first transaction and pay taxes accordingly and use the balance of the funds for the second transaction.  There are deadlines regarding the identification of the second property that you are going to purchase as well as deadlines for when the closing must occur.  If you run afoul of any of the rules, regulations and/or deadlines you will be taxed for the funds accordingly.

I have worked for many years with an excellent qualified intermediary company that handles most of the 1031 Exchange requirements and filings with the government.

If you are thinking of selling income producing real estate and want to conduct same as a 1031 Exchange as discussed, herein, it is very important that you notify your real estate Attorney well in advance and that you then speak with the qualified intermediary and your personal Accountantin order to make sure that the plan works properly for your particular needs.  There is no limit on how frequently you can do a 1031 Exchange.  There are now even financial institutions offering real estate based investments that you are permitted to roll your funds into so that they continue to grow tax deferred.

If you have any thoughts of questions or interest in selling your income producing real estate at this time and want to learn more about a 1031 Exchange, please call our office at 201-796-5263 and we are prepared to handle all your concerns and questions.