Archive for September 2009

Selling Real Estate? Is A Tax Deferred Exchange (1031) Right For You?

September 8, 2009

Have you or your family owned an investment property for a long time but are afraid to sell it because of the income tax consequences? If so, the time may be right to cash in, secure your profits and not pay any tax on the gain.

Thanks to §1031 of the Internal Revenue Code, a properly structured transaction will allow an investor to sell a property, to reinvest the proceeds in a new property and to defer all capital gains taxes. Such a transaction is commonly referred to as a “tax deferred exchange” or  a “1031 exchange.” The procedure for facilitating the exchange is conceptually fairly straightforward, however the process may not be.

In order to accomplish a successful 1031 exchange, there are three conditions that must be met, and they are as follows:

1.    There must be an actual exchange, not just a transfer of property for money only;
2.     The properties exchanged must qualify, and be of “like-kind”; and
3.     The time requirements must be strictly followed.