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It’s important for our clients to understand the process before starting the 1031 Exchange. For this reason, you can get connected with us to get the detailed information about 1031 Exchange on our website.

What is a 1031 Exchange?

Section 1031 of IRC or a 1031 exchange, is an arrangement that allows investors to defer capital gains taxes on exchanging an investment property for another like-kind property. Under a 1031 exchange, if an investor chooses to reinvest the entire proceeds from the sale of their relinquished property into another like-kind property, they can defer paying taxes on the transaction.

Exchange Rules

1. You can identify up to three 1031 exchange properties of any value with the intent of purchasing at least one of them 2. You can identify more than three exchange properties with an aggregate value that does not exceed 200% of the market value of the relinquished property 3. You can identify more than three 1031 exchange properties with an aggregate value exceeding 200% of the relinquished property, knowing that 95% of the market value of all properties identified must be acquired.

Delayed Exchange

Delayed Exchanges are also referred as a Forward Exchange, under this exchange the sale of one or more pieces of property is involved, the proceeds of which are held by a Qualified Intermediary, and the Seller identifies one or more replacement property within 45 days and completes the process of the replacement property within 180 days after the sale of property.

Reverse Exchange

A reverse exchange is an exchange under which the replacement property is acquired first, and then the existing property is sold. The motive of the reverse exchange was to help buyers in purchasing a new property before forcing them to trade or sell the existing property. This helps the investor or the taxpayer to hold the current property until its market value increases, thereby also increasing their timing to sell at maximum profit.

Improvement Exchange

An Improvement Exchange allows the investor or the taxpayer to acquire the property of their choice. Improvements can be like repairs in current structures or as complex as ground-up into new construction. This Exchange opens up many opportunities for the investor, even the possibility of improvements to property have already owned.

Blended Exchange

This Exchange is the combination of both Delayed and Reverse Exchanges. It is possible to sell one property before acquiring the replacement property and to relinquish another property later.