What does a 1031 exchange company do?
Generally, a 1031 exchange is a transaction in which a real estate investor swaps one property for another. The transaction is guided by Section 1031 of the Internal Revenue Code because the strategy is designed to allow investors to defer capital gains taxes when specific requirements are met.
Can you do a 1031 exchange internationally?
Allowable foreign exchanges In general section 1031, the Internal Revenue Code (IRC) does not allow exchanges between a U.S. property and a foreign-based property. The IRC specifically states that property held in the U.S. is not of a like-kind with foreign-held property.
Is 1031 a federal exchange?
Section 1031 is a provision of the Internal Revenue Code (IRC) that allows a business or the owners of investment property to defer federal taxes on some exchanges of real estate. Qualifying Section 1031 exchanges are called 1031 exchanges, like-kind exchanges, or Starker exchanges.
What are the rules of a 1031 exchange?
The three primary 1031 exchange rules to follow are:
- Replacement property should be of equal or greater value to the one being sold.
- Replacement property must be identified within 45 days.
- Replacement property must be purchased within 180 days.
Do I need a lawyer for a 1031 exchange?
The IRS statute requires that you use a qualified intermediary (QI) to perform your 1031 exchange. While it is possible for an attorney to provide this service, it doesn’t have to be an attorney and it can’t be an attorney you have utilized for any other matters.
How long do I have to hold a 1031 exchange property?
If a property has been acquired through a 1031 Exchange and is later converted into a primary residence, it is necessary to hold the property for no less than five years or the sale will be fully taxable.
What happens when you sell a 1031 exchange property?
A 1031 exchange allows an investor to sell a real estate asset and purchase a “like-kind” asset without paying capital gains taxes on the sale — even if they made a massive profit. That means the deferred capital gains tax on the property you sell will become due when the replacement property is sold.
How quickly can I 1031 exchange?
180 days
Can I do a simultaneous or immediate 1031 exchange? You certainly can. Just because you’re allowed 45 days to identify replacement properties and 180 days to complete a 1031 exchange doesn’t mean you need to use them.