EXPLANATION

​

A 1031 exchange is an IRS allowance to defer, (and sometimes) eliminate Federal and State income tax assessed against investment real  estate, or 30 year leases, for property sold during the tax year. This process is called a like-Kind exchange and requires the simultaneous transfer of deeds.

​

However, the likelihood that the property you desire for purchase is owned by someone who targets your property is not feasible . According to Forbes, this is why “the vast majority of exchanges are delayed, three party, or “Starker” exchanges (named for the first tax court case allowed).This transfer method is called a “Delayed Exchange”

.

 Delayed Exchanges requires an accommodator to assist facilitation of the transfer.  The Accommodator will “sell” your property through escrow, transfer acquired cash at closing to the seller of your targeted property that will be acquired by the client.  This three party exchange is treated as an IRS approved trade.

​

 Exchanges must  be like-kind. Investment property of any characterization for investment property, ie land for apartments, land for land, rental property for shopping centers, investment property for a partial ownership of investment property, 30 year leases for rental property. Many options are qualified. One cannot exchange into a personal dwelling.

​

To defer the entire income tax, one must match the purchase price of the new with the net sales price of the old. Match the new loan with the old loan and all the cash from the sale of the old is used to acquire the new. Any deviation of the applicable numbers will still complete a proper exchange.

​

CAVIATS

​

​1.  A targeted property into which one trades must be identified within 45 days

​

2. The targeted property must be acquired within 180 days or less, if the 180th day anniversary falls on a weekend or holiday.

​

3. Any unused cash, delta between the sales price and purchase price, debt relief and other inconsistencies may be subject to an income tax assessment.

​

TAX CONSULTATION AVAILABLE

 

Because our Exchange Accommodation Company has partnered with a Tax Accounting operation, we provide Tax consultation to our clients. We believe our company is uniquely qualified to include this “one-stop” service.

​

​

Resources (2)