Protect Your Investment
The 1031 Exchange is a viable option to protect your investment profits. Save on potentially paying thousands of dollars in capital gains taxes to the IRS on the sale of your investment property.
What is the 1031 Exchange?
The Internal Revenue Code Section 1031 allows for deferral of capital gain tax if property held for productive use in a trade, business or for investment is exchanged for property of like-kind.
Why defer capital gains tax?
- Great solution to preserve your equity
- Reach your investment goals by re-investing your gains
- Your capital will grow and you will produce income
- Receive a high Return of Investment (ROI) on your investment property
- Save money by deferring taxes
The 1031 Exchange Process
Understanding the Process:
It is important to note that no two transactions are alike. Our facilitators manage the parties involved and streamline the process for a smooth transaction. As you can see in the chart, there is a strict timeline to complete the sequence:
Relinquished Property Guidelines:
- Before the Exchanger (seller) relinquishes the property on sale:
- They must first enter into an Exchange Agreement with their Qualified Intermediary (QI). Our facilitators obtain the QI and arrange the agreement so that they can begin the process of transfer.
- QI’s offer a “safe harbor” protection in the exchange of assets, satisfying Treasury regulations.
- Exchanger must assign rights under the Relinquished property sale contract to the QI and provide notice of assignment to the buyer.
- At the time of closing of the Relinquished property:
- The “clock starts ticking”, there is a 45-day timeline to Identify a replacement property.
- The net proceeds known as “exchanged funds” from the Relinquished property sale are paid directly to the QI. The funds will be held on behalf of the Exchanger until they purchase a Replacement property.
Replacement Property Guidelines:
- Before closing the sale of the Replacement property:
- The Exchanger assigns the rights under the Replacement property purchase contract to the QI and proved notice of assignment to the seller.
- The Exchanger authorizes the QI to wire funds directly to the seller/closing agent for purchase of the Replacement property.
- The QI is then authorized by both parties of the Relinquished property & Replacement property to wire funds directly & transfer Titles directly, completing the exchange.
- The total process takes about 180 days.