What is a 1031 Exchange?

What is a 1031 Exchange
What is a 1031 Exchange?
Tax Code Section 1031 allows real estate investors to sell property that has been held for investment or productive use in trade or business and defer capital gains and depreciation recapture taxes if they acquire “like-kind” property of equal or greater value and reinvest all of their equity. The fundamental principle is to permit the property owner to continuing investing and defer taxes that would normally be due on the gain from the sale.
Advantages of a 1031 Exchange:
- Properties that have been held for an extended period of time and are “tax-locked” can be freed up.
- Deferred capital gains tax
- Money available for reinvestment instead of going toward taxes
- Heirs can receive a stepped-up tax basis equivalent to fair market value
Basic Rules of a 1031 Exchange:
- Properties must be exchanged for ‘like-kind’ property
- Property must be held for investment or productive use in trade or business
- Replacement property must be identified within 45 days
- Exchange must be completed within 180 days or the tax dues date, whichever is earlier
In the next post, I will describe the basic steps to a 1031 Exchange.

If you would like more information on 1031 Exchange or the current real estate market you can contact me Tracy Thompson 623-326-0597, Tracy@TalkToTracyHomes.com or visit my website http://www.AZHomeBuyerHelp.com