1031 Exchange is a swap process from one (or more) investment property to another, allowing capital gain taxes to be deferred. Investors can accomplish numerous investment objectives through 1031 exchange such as greater leverage, diversification, freedom from joint ownership, improved cash flow, geographic relocation, and property consolidation.
- Purchase Equal or Greater Value
- Reinvest all Net Equity
- Equal or greater debt. (Exception: A reduction in debt can be offset with additional cash, however a reduction in equity cannot be offset by increasing debt.)
The exchange period begins with the transfer of the first property providing the investor 45 days to identify, and a total of 180 days to close, on “like-kind” replacement property. The exchange is completed when the qualified intermediary is assigned into the Purchase Contract, utilizes the proceeds received to acquire the replacement property, and instructs the closer to transfer ownership to the exchanger via direct deeding.
To avoid the payment of capital gain taxes the Exchanger should follow three general rules: (a) purchase a replacement property that is the same or greater value as the relinquished property, (b) reinvest all of the exchange equity into the replacement property, and (c) obtain the same or greater debt on the replacement property as on the relinquished property. The Exchanger can offset the amount of debt obtained on the replacement property by putting the equivalent amount of additional cash into the exchange.
Below are some examples of properties we have represented or participated in the sale.
